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🧾 List of Most Upside Dividend Stocks

Every month, I compile data on the dividend stocks with the most upside based on Wall Street analysts price targets.

Members will get access to the full list every month, as well as all other Dividendology features.

This month, we had the most stocks ever show up on the list at 88.

Let’s dive in.

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1. 🌐 Cisco Systems (CSCO)

Wall St. Price Target: $140.80 | Upside: 29.88%

Want to see a frightening chart?

U.S. stock market valuations are at all-time highs based on nearly every imaginable metric.

Of course, this doesn’t tell the full picture at all.

When we look at the market by sector, the valuation story looks different.

The Goldman Sachs exhibit below focuses on one measure, consensus forward 12-month P/E, rather than an average of eight measures across the whole market.

Here’s what most wouldn’t expect:

Industrials are trading at one of their most expensive valuations ever-

Meanwhile Information Technology trades at 20 times forward earnings, and at the 44th percentile of its 10-year history and the 54th percentile of its 30-year history.

With that being said, Cisco is in a much different scenario.

Why?

Because the P/E multiple has expanded dramatically over the last 3 years.

Let’s see if we can back into why it made it onto this months list of most upside Wall Street stocks.

For years, the basic appeal of Cisco was a large networking business generating cash and returning much of it to shareholders.

But that brings us to what is changing inside Cisco.

The buildout of AI data centers is creating demand for the networking equipment that moves enormous amounts of data among chips, servers and facilities.

The scale of the change is already visible in Cisco’s orders.

1. Fiscal fourth-quarter product orders grew 35% from a year earlier

2. Even after excluding hyperscale cloud customers, orders increased 25%

3. Networking revenue grew 28%, helping total quarterly revenue rise 18% to $17.3 billion

Cisco also received $4 billion of AI infrastructure orders in the quarter, bringing its fiscal-year total to $9.3 billion.

"With the breadth and depth of our portfolio and our competitive differentiation in secure networking, Cisco is well positioned to support our customers however or wherever they decide to deploy AI." - Chuck Robbins, Chair and CEO of Cisco

Cisco expects total fiscal 2027 revenue between $72.2 billion and $73.4 billion, up roughly 15% at the midpoint from the $63.3 billion it reported in fiscal 2026.

That is significant growth for a business of its size.

The question is whether Cisco can preserve its economics as AI hardware becomes a bigger share of sales.

The dividend is sitting at a 1.52% yield with an FCF payout ratio of 51.3%.

Keep in mind, Cisco uses about twice as much capital to buyback shares vs dividends.

Add those together, and nearly all of the year’s free cash flow went back to shareholders.

As mentioned above, Cisco is trading well above its historic valuation multiple.

But if Cisco hits their projected EPS estimates according to analysts and also sees a serious pullback in the P/E multiple, there is still upside at current levels.

2. 🏗️ Brookfield Infrastructure (BIP)

Wall St. Price Target: $47.83 | Upside: 34.17%

Brookfield Infrastructure looks like a utility stock on the surface level, but its business reaches far beyond electric and gas networks.

It also owns transportation assets, pipelines, fiber networks and even data centers.

Many of these businesses earn revenue through long-term contracts or regulated rates, giving Brookfield a base of cash flow from assets that are difficult to replace.

The company is currently yielding slightly over 5%, with historical dividend growth rates ranging between 6% - 7%.

The second-quarter results show that Funds from operations, or FFO, increased 10% to $702 million, while FFO per unit rose 10% to $0.89.

There is one obvious segment that stand out from the recent quarter:

The next opportunity is AI infrastructure.

Brookfield was selected to develop a Kentucky data-center campus with partners, announced a planned 200-megawatt computing project in South Korea and expanded its Bloom Energy power framework to $25 billion of potential capital spending.

Of course, this does not automatically translate into a certain level of earnings-

But management does say it will commit significant capital only after securing suitable commercial terms and returns.

Keep in mind that the 5% yield is based on that fact that they use around 81% of AFFO to pay the distribution.

BIP is currently trading below it’s 5YR average AFFO per share multiple.

3. 💳 American Express (AXP)

Wall St. Price Target: $380.41 | Upside: 22.74%

Did you know American Express is a stock Warren Buffett added to his portfolio in 1991, and has still never sold?

It’s currently Berkshire Hathaway’s 2nd largest position.

With that being said, this is a business model that is still often misunderstood.

The chart below shows Amex connecting cardmembers with merchants and using airline, hotel and retail partners to make its cards more useful.

Amex earns discount revenue when members spend, annual fees on many premium cards and interest when borrowers carry balances.

Rewards, customer service and technology are the substantial costs.

This is why the model actually differs from Visa and Mastercard.

Those companies run payment networks, while banks generally issue their branded cards and make the loans.

Amex runs a network and issues many cards itself.

It can earn revenue from both spending and lending, but it also bears the credit losses when its borrowers fail to pay.

With that being said, let’s assess the data from the recent earnings report.

Cardmember spending grew 9%, its fastest currency-adjusted growth rate in three years, and earnings per share rose 11% to $4.53.

Management also raised its 2026 revenue-growth forecast to 10%.

The economics of a premium member are the part you should be watching closely.

Net card fees rose 15% to $2.86 billion, while variable customer engagement costs, including rewards and services, rose 17% to $8.76 billion.

Those figures are not a profit calculation: Amex also earns revenue when members spend.

But adding fee-paying customers creates value only if their fees and spending ultimately justify what Amex spends to attract and retain them.

If engagement costs keep outpacing fees without a matching lift in merchant revenue, earnings could end up falling short of what Wall Street’s expectation are.

Amex currently has a yield of 1.22%, but an incredible 5 YR dividend CAGR of above 15%!

From a valuation perceptive, they currently trade right in-line with their historic valuation multiples.

With EPS growth estimates currently sitting at around 14% over the next few years, AXP is an example of a quality stock trading at a fair valuation.

Wall Street currently has an average price target of $380.41, or roughly 22% upside from currently prices.

Now, let’s dive into the full list of dividend stocks with the most upside according to Wall Street.

As a reminder, this list is updated monthly, and is always available on Dividendology.com by visiting our database.

Read more

One that generates MASSIVE dividends day after day.

Dividends are, of course, the most passive form of income all time.

For example, when you buy the S&P 500, you have roughly 28.9 million employees working at all hours to maximize shareholder value.

Today, we will review the 10 principles you MUST understand to turn your portfolio into a Dividend Kingdom in 2026-

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1. 🏅Dividend Growth Outperforms

The most in depth research study on dividend growth stocks was recently performed by Hartford Funds.

One of the main takeaways?

Stocks that grow their dividends have historically outperformed.

But the study doesn’t just stop there.

Dividend growth stocks not only outperformed, but also outperform while seeing lower levels of volatility.

Buy stocks that grow dividends.

2. ⚖️ Capital Allocation

The reason for this outperformance from dividend growers isn’t technically because they grow dividends-

It’s because of wise capital allocation, leading to growing free cash flow.

Don’t make the mistake of assessing the quality of a dividend stock without assessing the quality of their free cash flow.

Remember, the most important task of management is allocating capital.

In general, management has five options:

1. Reinvest back into the business

2. Pay down debt

3. Mergers & acquisitions

4. Buyback shares

5. Pay out dividends

Management’s goal is to maximize shareholder value.

They must determine how to do that through proper capital allocation.

If management uses all of its capital to payout dividends, there is no capital left over to pursue the other four options.

3. 💵 Show Me the Free Cash Flow!

Based on the capital allocation chart we can see above-

Dividends are not free money.

They are paid out of free cash flow.

Let’s look at the example below.

Above, we see three example stocks listed with their 2025 dividend per share listed and their 2025 free cash flow per share listed.

When someone asks-

‘How much do your stocks earn for you?’

Most people answer with how much they pay them in dividends.

This technically isn’t correct.

The real answer should be how much they generate for you in free cash flow.

While in the above example, those three stocks paid out a total of $1,652 in dividends-

They generated $5,291.34 in free cash flow.

This is the true measure of how much these stocks actually earned you.

Management is then left with the decision on how to properly allocate it to maximize shareholder value.

Proper allocation will lead to growing free cash flow, which leads to rapidly growing dividends.

4. 🛡️ Dividend Growth vs Inflation

A history of dividend growth isn’t good enough.

The reality is that if a stock is not growing their dividend at a rate above inflation, then the amount paid in dividends is technically shrinking.

This is detrimental if you are looking to one day live off dividends.

Look at Verizon’s dividend growth for example:

While Verizon has been growing dividends for over 20 years, the rate they grow them at is below the rate of inflation.

And of course, Verizon only has a total return of 62% in the last decade, due to slow free cash flow growth.

5. ♻️ Look for Sustainable Dividend Growth

Have you ever heard of the term ‘Sustainable Dividend Growth’?

It’s not a very common term.

It’s easy to be impressed by seeing large double digit dividend growth-

But that doesn’t tell you if that growth was sustainable.

Here’s the reality:

If a stocks grows dividends faster than the rate they grow free cash flow, then the free cash flow payout ratio increases.

This means that level of dividend growth is unsustainable.

Look at Zoetis for example.

Zoetis grew dividends over the last 5 years at a compounded annual growth rate of 16.22%-

But free cash flow only grew at 6.41%.

As a result, the free cash flow payout ratio climbed higher.

It isn’t enough to simply check for dividend growth.

It must be backed by growing free cash flow.

This is why I use automated sheets from Tickerdata to easily assess dividend sustainability.

6. ❄️ The Dividend Snowball

You’ve probably heard of the dividend snowball effect.

It’s the idea that as time goes on, your dividends get larger and larger due to compounding.

Dividend payments can grow from:

1. Contributing capital

2. Reinvesting dividends

3. Your holdings increasing dividend payouts

To maximize the dividend snowball, you need all three working together.

But remember:

Early on, dividend income grows mainly from contributing capital.

But as the snowball starts rolling, dividend income grows mainly from reinvesting dividends and your holdings increasing dividend payouts.

7. 📝 Track Your Portfolio

Everyone wants to live off dividends.

But if you aren’t actively:

• Tracking your dividends

• Tracking expenses

• Projecting what your portfolio will look like in the future

Then you have no idea if you are behind, ahead, or right on track to living off dividends.

And as a result, you have no idea if you should be pursuing more of a high yield strategy, or a primarily dividend growth strategy.

Here is an example of the Investment Dashboard from Tickerdata that you can use to track your portfolio:

8. 📊 Dividends Can Increase Total Returns

Did you know dividends have the ability to increase total returns?

Meta is a great case study of this.

Nearly 2.5 years ago, Meta announced plans to start paying dividends.

If we examine their financials, we see a company with exceptional profitability.

Meta was growing revenue rapidly and had a very strong balance sheet.

Yet, despite their financial strength, Meta faced a unique problem-

They had too much cash.

Over the past five years, Meta burned through $45 billion+ trying to build Reality Labs, their metaverse division, which turned out to be unprofitable.

This illustrates a critical point.

Even the best companies can misallocate capital if they reinvest too much without getting proper returns.

By choosing to pay dividends now, Meta is simply acknowledging they are generating too much cash to intelligently reinvest back into the business, so they now pay out a growing dividend.

If Meta would have paid out that $45 billion as a dividend instead of wasting it on a project with a negative return, it would have substantially increased their total returns.

Capital allocation is everything.

9. 💰 Know When & How to Pursue High Yield Investing

I love Dividend Growth investing.

But depending on your situation, it can sometimes make sense to pursue High Yield investing.

In the long term, Dividend Growth investing can generate more in dividends.

But in the short term, High Yield investing can generate far more income.

This sounds obvious, but have you ever thought about how powerful High Yield investing can be?

If you can achieve a sustainable yield of 8%, the amount of capital we would need to retire is cut in half. (based on the 4% rule).

We started building our real money High Yield Portfolio for members of Dividendology back in September of 2025.

So far, that portfolio has outperformed for the majority of 2026, while providing a sustainable yield of 9.32%!

You can read more about our High Yield Portfolio and its goals here.

10. 🌅 Enjoy the Ride

Have you ever heard the story of the Mexican fisherman?

If not, then you need to take 3 minutes to read it below. 👇

Perspective is everything.

💥 Want Access to More?

We are currently still building out our Dividend Growth and High Yield Portfolio on Dividendology.com.

You can get access to them and everything else mentioned below here:

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You can make a one-time investment, and get paid a growing stream of income for the rest of your life.

And on top of this?

Dividend growers have historically outperformed.

Today, we will be looking at the characteristics we need our dividend growth portfolio holdings to have in order for us to outperform over the long term.

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🧮 Sources of Returns

It’s always important to review the 3 potential sources of returns:

• Earnings per share growth

• Multiple expansion/contraction (Price to earnings ratio growing/shrinking)

• Dividends

For example, here is what the sources of returns look like for the S&P each decade:

Some decades (like the 2010s), earnings growth was the main driver of returns.

Some decades (like the 1980s), multiple expansion was the ultimate driver of returns.

And some decades, when market performance was particularly poor-

Dividends were the main driver of returns, and sometimes the only positive source of returns.

We must note that over the long run, share price follows earnings growth.

📈 Outperforming the Market

Many of the decades (not all) where the S&P 500 had above average returns were primarily driven by:

• Earnings growth

• Multiple expansion

These are the ultimate engines of market outperformance over the long term.

The math behind this is simple.

Let’s say we have a stock that grows earnings per share at 15% per year.

At a 15% annual growth rate, earnings would double in about 4.8 years

Assuming that:

• The stock doesn’t pay dividends

• The P/E multiple stays the same

This means that the share price of the stock over the 4.8 year time period would double as well.

A 100% gain in just 4.8 years!

But let’s run this scenario one more time…

This time we will assume the stock is trading at a price to earnings multiple of 15.

Like above the stock continues to grow earnings per share at a rate of 15%.

But at the end of the 4.8 year period, the company is trading at a P/E multiple of 25.

To review:

• EPS grows at 15%

• The P/E multiple expands from 15 to 25

This means the stock would provide a total return of 234% in just 4.8 years!

🛒 Walmart Case Study

Walmart is a great case study of ‘sources of returns’ right now, with the stock close to a 52 week low.

First, let’s make a simple acknowledgment:

Walmart is an excellent business.

The company generated more than $713 billion in fiscal 2026 revenue, $41.6 billion in operating cash flow, and $14.9 billion in free cash flow.

The underlying business continues to grow, produce stable cash flows, and gain market share-

And to some degree, could be considered ‘AI proof’.

From February 2016 through January 2026, Walmart delivered a total return of 542.2%, or approximately 20.6% annually!

However, look at where those returns came from:

• 104.1 percentage points from earnings growth

• 103.4 percentage points from dividends

• 334.7 percentage points from multiple expansion

Nearly 62% of Walmart’s total gain came from investors paying a higher valuation multiple for the same business.

Multiple expansion is easily justified if a company is significantly widening their MOAT or projected to grow earnings at a much faster rate in the future.

However, Walmart had climbed to a high P/E multiple of roughly 45x near the beginning of 2026.

The dividend also provided very little protection at that valuation, with the yield below 1% at and a 5 year dividend CAGR of roughly 6%.

Investors were receiving a sub-1% starting yield, moderate dividend growth, and an earnings yield of less than 3% based on the forward P/E multiple.

The result was Walmart significantly underperforming the broader market so far in 2026.

The underlying business is still performing well-

But the stock is underperforming because its elevated starting valuation left very little room for anything less than exceptional results.

Even when earnings and dividends continue growing, multiple contraction can overwhelm those operational returns.

This is why identifying a great company is certainly a great first step, but we must also understand what are their potential sources of returns moving forward.

Let’s look at a recent example where sources of returns worked heavily in my favor.

🏅Microsoft Case Study

Some may call it hindsight bias, but the easiest investment I ever made was when I made Microsoft my largest position back in 2022.

The reasons I had such high conviction on this investment, was because I was looking at Microsoft through the lens of what my potential ‘Sources of Returns’ were.

Let’s look at the history of MSFT.

From January of 2000 to 2010, MSFT stock declined by -47.7%.

However, during this time period, EPS grew from $0.89 to $2.13.

That means EPS grew at a compounded annual growth rate of 9.1%!

MSFT also started paying dividends in 2003, with an initial yield of 0.55%-

And grew the dividend at a 7.1% CAGR through 2010.

What does this mean?

Microsoft was providing double digit operational returns (Dividend Yield + Earnings Growth).

But the entire decade of returns was destroyed by multiple contraction.

The P/E multiple for MSFT was well over 50 at multiple points in the year 2000.

Buying stocks at an overvaluation can destroy decades of returns.

Compare this to my investment in MSFT in 2022 over a 3 year time period.

During this time, MSFT has grown EPS at a compounded annual growth rate of 12.7%.

The yield was above 1%, and grew at a near double digit rate.

They were providing a double-digit operational return annually.

But here’s what really made the difference.

MSFT was trading at its lowest PE multiple in over 5 years, at below 25.

Even if the PE multiple for MSFT remained unchanged-

I would still have gotten:

• 12.7% returns from EPS growth

• Over 1% returns from dividends (plus dividend growth!)

Near 14% returns annually.

But the market realized it’s mispricing of MSFT, and the PE multiple has climbed significantly.

This led to total returns of well over 100% in just a 3 year time period.

🔍 S&P 500 Sources of Returns

Shall we dive deeper into this concept?

The chart below is one of the most important charts you’ll see today.

It shows the underlying sources of S&P 500 returns since the beginning of 2020-

However, it shows the sources on a much more detailed level.

It shows exactly how and why earnings grew.

Through August 2026, the S&P 500 generated a cumulative real return of approximately 114%.

That means the return is adjusted for inflation.

The chart breaks that return into six components:

1. Organic sales growth: +27 percentage points

2. Margin expansion: +29 percentage points

3. P/E multiple expansion: +36 percentage points

4. Buybacks: +19 percentage points

5. Dividends: +14 percentage points

6. Share dilution: −11 percentage points

Together, these components explain the market’s approximately 114% inflation-adjusted return.

Two things immediately jump out.

First, look at what happened in 2022.

Fundamentals kept improving.

BUT-

The S&P 500’s cumulative real return since the beginning of 2020 fell from approximately 50% to nearly 13%.

Why?

Because the collapse was primarily caused by valuation multiple contraction.

Investors were suddenly willing to pay much less for each dollar of corporate earnings.

A company can continue growing sales, earnings, and dividends while its stock price falls because the valuation multiple contracts (like we saw above for Walmart).

This is one of the biggest advantages for dividend growth investing, particularly for retirement.

Your portfolio value can still decline significantly when valuations compress.

This is detrimental if you are planning to utilize the 4% rule.

However, if your living expenses are funded by a growing stream of dividends-

You are less dependent on selling shares at whatever valuation the market happens to assign them.

Basically, as we discussed last week, this alleviates you from sequence of returns risk.

But the second important takeaway is something we didn’t point out last week.

It’s the fact that P/E multiple expansion has been the single largest contributor to S&P 500 returns since 2020, adding approximately 36 percentage points.

At first, that sounds concerning (and to some degree it is).

Returns driven by multiple expansion are generally less durable than returns driven by sales and earnings growth.

Valuations cannot expand indefinitely, and the same force that boosted returns can eventually work in reverse.

But there has been meaningful fundamental growth supporting the market’s return.

The risk is that valuations are now placing greater demands on that future growth.

Of course, this brings us to the never ending debate as to whether or not we are actually in a bubble.

🫧 Is There a Bubble?

During the dot-com bubble, Cisco’s share price became completely disconnected from its forward earnings expectations.

Nvidia looks radically different.

Its share price has surged since 2020, but forward earnings expectations have risen alongside it.

Here’s the caveat to this:

If we are in a bubble today, it may be embedded in the earnings expectations themselves, not the price of the stock.

The market is assuming that AI demand, spending, margins, and earnings will remain extremely strong.

But if those expectations prove too optimistic, earnings estimates could decline while valuation multiples contract at the same time.

so if we look at this scenario through the lens of sources of returns, we would se a severe decline in the valuation multiple AND earnings.

This brings us back to the unique role of dividends.

Share prices, earnings expectations, and valuation multiples can change rapidly.

However, a well-covered dividend supported by durable cash flow is one of the most stable and predictable sources of returns.

Dividends provide a source of return that have proven to be incredibly reliable over the years.

Obviously that does not make every dividend safe.

But companies growing free cash flows with strong balance sheets, and healthy payout ratios can continue paying and growing their dividends while the market works through an earnings or valuation reset.

⚡Our Dividend Growth Portfolio

The goal of our Dividend Growth Portfolio?

Buy stocks that allow us to benefit from all 3 of the sources of returns.

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1. 🌿 Innovative Industrial Properties (IIPR.PR.A)

Innovative Industrial Properties (IIPR) is a specialized REIT that owns cultivation and processing facilities leased to licensed cannabis operators across the United States.

The common stock still offers a very high yield, sitting at roughly 13.3%.

However, I’m not interested in the common stock here.

I’m far more interested in the preferred shares.

IIPR’s 9.00% Series A cumulative preferred shares currently offer a yield of roughly 9%, which is already attractive on its own.

But what makes it so attractive relative to the common stock is that the risk to reward is quite attractive.

The income from the preferred shares is backed by one of the more conservative balance sheets in the REIT sector.

IIPR ended the latest quarter at just 1.7x net debt to adjusted EBITDA, while the preferred dividend is covered roughly 16.6x by annualized AFFO.

That coverage ratio is lower than it was previously because IIPR has issued a significant amount of additional preferred stock, but it is still exceptionally strong-

And especially strong relative to the preferred stock of their peers.

That means the preferred dividend still has a very large cushion before it would come under meaningful pressure.

There have also been some encouraging developments on the tenant side.

One of the biggest recent updates involves the former PharmaCann facility in Hamptonburgh, New York, which was re-leased to Grown Rogue.

The PharmaCann facility had been one of the problem tenants investors were watching closely.

Re-leasing the property does not eliminate tenant risk across the portfolio, but it does show that IIPR has been making real progress repositioning troubled assets and replacing distressed operators with new tenants.

There was also an important new update on the preferred shares themselves from just earlier this month.

On September 1, 2026, IIPR filed an 8-K updating its at-the-market equity program.

The program continues to allow IIPR to sell both common shares and its 9.00% Series A preferred shares, with as much as $500 million of aggregate offering capacity.

IIPR is still actively preserving the ability to issue more of the 9% preferred stock.

Keep in mind, the preferred is already callable at $25.

If management were preparing to redeem the security in the near future, it would be somewhat unusual for the company to simultaneously maintain an active mechanism allowing it to issue even more shares of the same preferred.

In my view, this makes an imminent redemption look less likely, which is good news for those of us who want to collect the high yield.

The trade-off, of course, is that every additional preferred share increases IIPR’s fixed dividend obligation.

So if management continues issuing preferred stock aggressively, the preferred dividend coverage ratio will gradually come down.

This is something I will continue watching closely.

For now, though, the cushion remains substantial.

Based on the latest quarter, the preferred dividend is still covered roughly 16.6x by annualized AFFO, while leverage remains just 1.7x net debt to adjusted EBITDA.

And importantly, there has been no new preferred dividend reduction, call or redemption announcement, or major new tenant default.

So the thesis remains largely intact.

The cannabis industry remains volatile, and yes, IIPR still has tenant credit risk, and continued preferred issuance could eventually reduce the margin of safety.

But investors are still collecting around 9% annual income from a cumulative preferred security backed by a very lightly leveraged REIT with strong dividend coverage, while recent tenant developments are moving in the right direction.

The September ATM update actually strengthens one part of the thesis:

Management’s willingness to continue issuing the preferred suggests the company still views 9% preferred capital as useful, making a near-term call appear less likely.

In complete transparency, we added this position in March at $22.36 a share when the yield was over 10% (a CAGR of roughly 39%!!).

We are currently up roughly 17% on this position with a 10%+ yield locked in.

2. ⚡ Broadcom (AVGO)

I’ve been bullish on Broadcom for years, and despite the enormous run in the stock, I still think AVGO is one of the most interesting large-cap growth opportunities in the market.

The mistake investors often make is assuming that because a stock price has gone up significantly, the valuation must also be expensive-

But share price and valuation are not the same thing.

What matters is how quickly the earnings power of the business is growing relative to the stock price.

Broadcom’s forward normalized P/E has fallen to roughly 20.7x, its lowest level since 2024.

For context, the average multiple over the period shown above is roughly 29.9x, and at one point Broadcom traded near 49x forward earnings.

So even after a massive five-year run, the valuation today is much more reasonable than it was during much of the recent rally (since projected EPS growth is still so strong).

Analysts currently estimate EPS of roughly:

• 2026: $11.61

• 2027: $19.28

• 2028: $29.97

• 2029: $37.34

• 2030: $35.00

That works out to a projected EPS CAGR of roughly 31.8% from 2026 through 2030.

And the most recent quarter gave investors very little reason to believe the underlying growth story is weakening.

Broadcom reported Q3 non-GAAP EPS of $3.32, beating expectations, while revenue reached about $29.6 billion, up roughly 86% year over year. AI semiconductor revenue increased 221%, semiconductor solutions revenue grew 127%, and infrastructure software revenue increased 29%.

Broadcom has already generated roughly $31.9 billion in free cash flow through the first nine months of 2026, compared with about $26.9 billion in all of 2025.

As a result, the company’s 10-year dividend CAGR is roughly 26%, with the dividend growing from around $0.16 per share in 2015 to $2.42 in 2025.

So why did the stock sell off after earnings?

The main issue was Q4 revenue guidance of approximately $34.8 billion, slightly below the prior consensus of around $35 billion.

Selling off as a result of a slight quarterly miss is a big mistake.

Why?

Because management’s long-term outlook remains extremely strong.

Broadcom CEO Hock Tan said recently stated-

“We are very much on target to exceed $30 in earnings per share in fiscal 2028.” - Hock Tan

That is especially interesting because the current analyst estimate for 2028 is still below that level.

In other words, management is effectively signaling that Wall Street’s current earnings expectations may still be conservative.

The AI opportunity remains the primary growth engine, with Broadcom benefiting from huge demand for custom AI accelerators and networking infrastructure.

At the same time, VMware gives Broadcom a large recurring software revenue base.

That combination of explosive semiconductor growth and recurring software cash flow is extremely attractive.

For the sensitivity analysis, if we assume Broadcom grows EPS at 25% annually and eventually trades at a 30x P/E multiple… (both below current projected levels)

Under those assumptions:

2026: $348
2027: $435
2028: $544
2029: $680
2030: $851
2031: $1,063

From today’s roughly $366 share price, that would imply a total return of about 132% through 2030, or an annualized return of roughly 18.3%.

And even if we use a much lower multiple, the setup still looks attractive.

If Broadcom reaches roughly $30 in EPS by 2028, (as management stated they expect), and trades at only 20x earnings, that would imply a share price of about $600.

So our model is even conservative relative to management expectations.

That is the key reason Broadcom remains so compelling.

The stock does not need multiple expansion.

It simply needs the earnings growth story to keep playing out.

For long-term investors willing to tolerate volatility, I still think the combination of AI growth, recurring software revenue, enormous free cash flow, and exceptional dividend growth makes AVGO one of the strongest dividend growth opportunities in the market.

3. 🏦 Blackstone (BX)

Time to do something I’ve never done before-

Allow someone else to list a stock on my monthly list of undervalued dividend stocks.

For the final stock on this month’s list, I wanted to include an idea that actually came directly from David Bahnsen.

I recently had David Bahnsen on the Mispriced podcast.

He is the founder, managing partner, and chief investment officer of The Bahnsen Group, where his firm manages roughly $10 billion in assets, and he has spent decades investing through a dividend-growth framework.

At the end of the interview, I asked him the same question I ask every guest:

What is one equity you currently believe is mispriced?

His answer was Blackstone (BX).

Bahnsen acknowledged that Blackstone has already rerated higher from where it traded earlier in the year, but he still believes the stock remains mispriced.

His reasoning was fairly straightforward:

“Blackstone remains below its all-time high while continuing to grow its cash flow and distributions, yet the stock is still being hurt by negative sentiment surrounding private credit and alternative asset managers.” - David Bahnsen

I think that distinction is extremely important.

There is a difference between a business deteriorating and a stock being dragged down because investors dislike the industry it operates in.

Blackstone is the largest alternative asset manager in the world, with exposure across private equity, real estate, credit, infrastructure, and other alternative investments.

That creates an interesting setup because many investors currently hear words like “private credit” or “commercial real estate” and immediately become cautious.

And there are legitimate risks in those markets.

But negative sentiment toward an entire asset class can occasionally create opportunities in the highest-quality businesses operating within it.

Bahnsen’s argument is essentially that Blackstone’s underlying cash-generating power continues to improve even while the valuation reflects some of that broader skepticism.

• Blackstone reported 22% growth in fee-related earnings and 26% growth in distributable earnings in Q2.

• Distributable earnings came in at $1.52 per share, while fee-related earnings were $1.43 per share.

And one of the most important drivers is continued growth in assets under management.

As you can see in the image above, Blackstone’s fee-earning AUM increased from roughly $937.6 billion to $961.6 billion during the quarter, a gain of about 3%.

Blackstone aslo brought in roughly $43.3 billion of fee-earning AUM inflows, partially offset by about $12.6 billion of outflows.

That produced more than $30 billion of net flows during the quarter.

Private equity fee-earning AUM increased about 5%, while multi-asset investing grew roughly 8%.

Credit & insurance also posted strong inflows, while real estate was essentially flat.

This is the core of the Blackstone business model.

1. More capital comes into Blackstone.

2. That capital gets invested.

3. The company earns management fees on a larger asset base.

4. Successful investments can generate performance fees and realizations.

And over time, that strengthens the Blackstone ecosystem and helps attract even more capital.

In other words, fee-earning AUM has the ability to compound, and fee-related earnings can compound along with it.

There is also an interesting AI angle here with Blackstone.

Blackstone is obviously not a traditional AI stock, but it has become a major beneficiary of the infrastructure buildout.

Management said 9 of its 10 largest investment markups in Q2 were AI-related.

Its dedicated infrastructure platform appreciated 7.2% during the quarter and 29% over the last year, while its QTS data center business was the largest driver of appreciation across the firm.

This type of exposure is interesting, because Blackstone does not necessarily have to predict which AI model ultimately wins.

It can provide capital to the infrastructure behind the trend: data centers, private credit, private equity, real estate, and power-related investments.

At around the valuation referenced in the research, Blackstone was trading at roughly 22.5x forward earnings/distributable earnings, below its five-year average.

This is a business with nearly $1 trillion of fee-earning assets that is still producing double-digit growth in earnings and attracting tens of billions of dollars of new capital each quarter.

Now, let’s jump into this month’s full list.

Read more

The S&P 500 has gone through multiple extended periods of time where real returns were negative.

However, the typical response I see to the chart above is a massive mistake.

It usually goes something like this:

“This is cherry-picked data. If you simply dollar-cost averaged during this period, you still would have generated positive returns!”

That statement is absolutely true…

But it also misses the entire point of the chart.

Dollar-cost averaging can be incredibly powerful when you are still earning income and regularly contributing money to your portfolio.

But what happens when the paychecks stop?

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📉 The Lost Decade Was Real

From 2000 through 2012, the S&P 500 generated an average annual real return of approximately -0.8%, according to the data shown above.

This period included:

• The collapse of the dot-com bubble

• The September 11 attacks

• The 2008 financial crisis

• Two separate bear markets in which stocks fell by roughly 50%

• More than a decade of inflation eroding investors’ purchasing power

An investor who continued working throughout this period could keep buying shares at lower prices.

Every contribution purchased more shares while valuations were depressed.

When the market eventually recovered, those additional shares participated in the rebound.

That is exactly what dollar-cost averaging is designed to do.

But a retiree faced the opposite situation.

🏖️ What If You Retired in 2000?

Imagine retiring at the beginning of 2000 with what appeared to be enough money to fund the rest of your life.

You no longer have employment income coming in.

Instead of adding money to your portfolio each month, you must withdraw money to pay for housing, food, healthcare, travel, and other living expenses.

Then the market begins falling.

Your portfolio declines, but your expenses do not disappear.

You still need income, which means you may be forced to sell investments after their prices have already fallen.

When asset prices are depressed, you must sell more shares to generate the same amount of cash.

Those shares are permanently removed from your portfolio.

• They cannot generate future dividends

• They cannot compound

• And they cannot participate in the eventual recovery

The market may recover, but the investor may not.

⚠️ This Is Sequence-of-Returns Risk

Two investors can earn the same average annual return and experience completely different outcomes depending on when the positive and negative returns occur.

For an investor who is still accumulating assets, an early bear market can actually be beneficial.

New contributions purchase more shares at lower valuations.

For a retiree making withdrawals, an early bear market can be devastating.

Losses occurring during the first several years of retirement affect a larger portfolio balance.

When those losses are combined with regular withdrawals, the investor’s capital can become permanently impaired.

This chart shows how dramatically the timing of returns can affect a retiree.

Both portfolios begin with $1 million and experience the exact same returns.

The only difference is that the returns for the first and final years are swapped.

The portfolio beginning with a 29% gain finishes with more than $2.1 million.

The portfolio beginning with an 18% loss runs out of money after 17 years.

The deeper the early losses and the larger the withdrawals, the more difficult the recovery becomes.

This is why the order of your returns can matter just as much as your average return.

🔮 “Cherry-Picked” Is Only Obvious in Hindsight

Calling the year 2000 a cherry-picked starting point misses something important:

Real people invested real money in 2000.

This exact point came up during my recent interview with David Bahnsen, who manages over $10B of capital using a dividend growth strategy at The Bahnsen Group:

“I don’t understand why people think starting right before the cherry-picked notion of a dot-com blowup makes it invalid, as if there weren’t real-life people putting real-life money in at that time. It’s only with the gift of hindsight that we get to say, ‘That’s just because of the timing of the dot-com implosion.’ No one knows what the timing is.”

Nobody retiring at the beginning of that year knew they were approaching a 13-year period of negative inflation-adjusted returns.

Every disastrous historical starting point looks obvious in hindsight.

That is precisely why retirement plans should not depend on markets delivering their long-term average return on schedule.

The S&P 500 may generate attractive returns over several decades, but those returns do not arrive in a straight line.

You may experience an extraordinary period like 1985 through 1999, when the market produced average annual real returns of approximately 15.1%.

Or you may experience a period like 2000 through 2012, when inflation-adjusted returns were negative.

🧩 Not All Sources of Return Are Equally Dependable

This second chart is one of the most important charts you will see today.

It breaks down the true sources of the S&P 500’s inflation-adjusted return since the beginning of 2020.

Over that period, the S&P 500 generated a cumulative real return of approximately 114%.

That return came from six different sources:

1. Organic sales growth: +27 percentage points

2. Margin expansion: +29 percentage points

3. P/E multiple expansion: +36 percentage points

4. Buybacks: +19 percentage points

5. Dividends: +14 percentage points

6. Share dilution: -11 percentage points

The total return is certainly strong-

But the path taken to generate that return is even more important to understand, especially for someone depending on a portfolio during retirement.

Take a close look again at what happened in 2022.

Corporate fundamentals continued improving during 2022.

Sales grew.

Companies continued repurchasing shares.

Dividends continued accumulating.

Yet the S&P 500’s cumulative real return since the beginning of 2020 collapsed from roughly 50% to approximately 13%.

Why?

Because valuation multiples were crushed.

Investors became willing to pay substantially less for each dollar of corporate earnings as inflation surged and interest rates increased.

The underlying businesses did not suddenly lose most of the sales growth, dividends, and buybacks they had generated.

Short term, stock prices follow market sentiment.

Long term, stock prices follow earnings growth.

This is where dividend growth investing has some massive advantages.

Your portfolio value can still fall dramatically when valuations compress.

But if your living expenses are being funded by a sustainable and growing stream of dividends, you aren’t having to sell shares at whatever valuation multiple the market happens to assign them at a given point in time.

🚨 The 4% Rule is More Dangerous Than Ever

On a $1,000,000 portfolio, the 4% rule generates $40,000 in year one, then $41,200 in year two if inflation runs 3%, and so on.

The trinity study found this strategy worked more than 95% of the time on a 30-year retirement horizon.

That’s where the “95% success rate” you hear parroted everywhere comes from.

But here’s where things get interesting.

The 95% success rate is a historical average.

It blends together retirees who started in cheap markets with retirees who started in expensive ones.

And when you pull those two groups apart, the story changes dramatically.

Here’s the uncomfortable truth: every single historical failure of the 4% rule happened when stocks were expensive at the start of retirement.

So what does the success rate for the 4% rule look like when also accounting for valuation?

When the CAPE ratio is above 20, the historical failure rate jumps all the way to above 25%!

As a reminder, the CAPE ratio (Cyclically Adjusted Price-to-Earnings) is one of the most widely used ways to measure how expensive the stock market is.

Instead of looking at just one year of earnings like a normal P/E ratio, CAPE looks at the average of the past 10 years of earnings, adjusted for inflation.

So where is the CAPE ratio today?

Sitting at 42.04.

The CAPE ratio is the second highest it has ever been, second only to the dot com bubble.

In other words, we are sitting in exactly the valuation range where the 4% rule has historically broken down.

We don’t even have enough historical data to know what the success rate of the 4% rule would be in this valuation range.

💵 Dividends Are Predictable

This Texas Instruments chart provides a perfect real-world example of why I believe growing dividends can provide a more predictable foundation for retirement income.

• The gray portion represents the value of Texas Instruments’ annual share repurchases per share

• The blue portion represents dividends paid per share

I’m a big fan of share buybacks when performed correctly. (That’s a conversation for another day)-

But the simple reality is that Texas Instruments’ buybacks have fluctuated dramatically from year to year.

This tends to be the case for most stocks.

Dividends are by far the most predictable source of return, making them optimal for living off dividends, even during market downturns.

🎯 Build Income Before You Need It

The next lost decade will only be obvious in hindsight.

That is why Dividendology focuses on finding sustainable income supported by durable cash flows, healthy balance sheets, and responsible payout policies.

Members receive access to our model portfolios, complete holdings, trade alerts, in-depth research, and proprietary REIT, BDC, and options-income fund databases.

If you want to be apart of the Dividendology community, and get access pictured below, you can do here:

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A research tool providing in-depth information you can’t find on traditional softwares, that shows key information on how option-income funds are structured.

Here’s a small snippet:

But one question has continued to come up:

“When will Dividendology create a database for European option-income ETFs and ETPs?”

Today, I’m excited to officially release the Dividendology European Option Income ETF & ETP Database.

This new database provides an in-depth look at the rapidly expanding European option-income market…

And you can download it completely for free!

European Option Income Fund Sheet

Due to the nature of these funds, there is a lot of very important information in this sheet-

Some of which are unique to European Funds.

So today, we will be breaking down the key metrics you MUST understand when analyzing these funds.

Today’s newsletter is sponsored by IncomeShares, which has been helping lead the educational effort around European option-income products.

You can check out their entire suite of products here: IncomeShares ETPs

Let’s dive in.

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🚀 A Rapidly Growing Market

European option-income products have attracted more than $8 billion in assets under management.

However, much of this market is still extremely new:

• 42 of the 83 products in the database launched in 2026

• 61 of the 83 products are less than two years old

• 79 of the 83 products are domiciled in Ireland

That rapid growth makes education surrounding these funds especially important.

IncomeShares has seen significant growth in fund flows over the last few years.

🗂️ What’s included in the database?

For each of the 83 European option-income products, investors can research metrics including:

• Ticker and fund name

• Product issuer

• Underlying asset

• Trailing 12-month distribution yield

• Assets under management

• Expense ratio

• Distribution frequency

• Active or passive management

• Option strategy

• Option moneyness

• Portfolio option coverage

• Fund domicile

• Exchange listings

• Available currencies

• Potential withholding-tax treatment

• UCITS or ETP structure

Each ticker also links directly to the issuer’s product page, making it easier to verify the information and continue your research.

The database also includes a complete column guide explaining what each metric means.

Let’s dive into what makes these funds unique:

⚖️ ETF vs ETP

One of the first things investors will notice is that the European market includes both ETFs and ETPs.

An ETF is an investment fund that owns a portfolio of assets.

Many European ETFs operate under the UCITS regulatory framework.

UCITS stands for Undertakings for Collective Investment in Transferable Securities.

It is a European regulatory framework designed to establish standards around diversification, liquidity, disclosure, custody, and investor protection.

The important detail is that UCITS includes diversification and concentration requirements.

These rules make it difficult to package certain highly concentrated, single-asset option strategies inside a traditional UCITS ETF.

That is where ETPs can be useful.

An ETP is generally structured as a debt security backed by collateral rather than as a conventional investment fund.

Because it uses a different legal structure, it can provide concentrated exposure that may not fit within the UCITS framework.

Neither structure is automatically better, there are pros and cons to both.

An ETF and an ETP simply represent different legal structures with different protections, risks, advantages, and limitations.

🇮🇪 Why Fund Domicile Matters

The database also shows where each product is legally established and regulated.

This would be a metric most glance over initially, but it is much more important than most realize.

Of the 83 products currently included, 79 are domiciled in Ireland.

Why is this the case?

The main reason Ireland has become Europe’s dominant ETF domicile is its tax treaty with the United States.

At the fund level, an eligible Irish-domiciled fund collecting dividends from U.S. companies can generally face a 15% U.S. withholding rate instead of the standard 30% rate.

IncomeShares has a great visual example of what this can look like:

For a portfolio of U.S. dividend-paying stocks, that difference can potentially be worth roughly 0.20% annually, more than the entire expense ratio charged by some investment products!

This helps explain why Ireland reportedly holds approximately 78% of European ETF assets and accounted for 95% of new European ETF launches in 2024.

Domicile may look like an unimportant administrative detail, but it can meaningfully affect a product’s tax efficiency, regulatory treatment, and investor protections.

If you want to dive deeper into this subject, IncomeShares has a great article that you can read about it here.

🌍 IncomeShares Commodity ETP Lineup

IncomeShares currently offers commodity option-income ETPs tied to copper miners, gold miners, gold, silver miners, silver, uranium, and WTI oil, as well as a multitude of other strategies.

The Gold+ Yield and Silver+ Yield ETPs use covered-call strategies, while the other commodity products use a cash-secured put plus equity strategy.

The main takeaway is that these products are not simply passive bets on commodity prices.

They combine commodity exposure with an options overlay designed to turn volatility into recurring income.

Many of their commodity ETPs currently have distribution yields near 12%.

🥇 A Real-World Example: IncomeShares Gold+ Yield ETP

Let’s use the IncomeShares Gold+ Yield ETP (GLDI) as an example of what investors can learn from the database.

The ETP currently has a distribution yield of roughly 12%.

But the database helps us understand how the ETP is actually structured, which will impact future performance.

According to the database, GLDI:

• Provides exposure to gold through GLD

• Has approximately $52.7 million in assets under management

• Charges a 0.35% expense ratio

• Pays distributions monthly

• Uses an actively managed options strategy

• Writes weekly out-of-the-money covered calls

• Maintains approximately 100% portfolio option coverage

• Is domiciled in Ireland

• Is structured as a collateralized ETP rather than a UCITS ETF

• Is available in U.S. dollars, British pounds, and euros across several European exchanges

The most important information here is the combination of weekly out-of-the-money calls and 100% portfolio coverage.

Because the calls are written out of the money, GLDI retains some of gold’s upside before reaching the options’ strike prices.

However, because approximately 100% of the portfolio is covered, which is why the yield is at 12%.

The tradeoff is that a significant rally in gold could cause the ETP to underperform GLD as its upside becomes capped.

That means the strategy may be most attractive when gold:

• Trades sideways

• Rises gradually

• Experiences elevated volatility without a major directional move

It may be less attractive during an explosive gold rally, because the covered calls could limit participation.

The database gives us the insights to better understand how the fund is structured, which gives further insights to what market environments are optimal for the fund.

🚨 Next Week Is Dividend Week

The launch of the European Option Income ETF & ETP Database is only the beginning.

I’m obsessed with finding new ways to increase the value Dividendology provides, and next week, we’re taking that to another level.

I’ll be releasing new research, resources, and insights focused entirely on helping investors find better dividend growth and high-yield opportunities.

That’s why I’m officially declaring next week “Dividend Week.”

There is much more coming, but I’ll leave it at that for now.

Like always, if you want to get access to the Dividendology Database, as well as all the features mentioned below, you can do so here:

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Tickerdata 🚀 (My automated spreadsheets and instant stock data for Google Sheets!)

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HYSA 📊 (Get Access to the Best High Yield Savings Accounts!)

Disclaimer: As a reader of Dividendology, you agree to our disclaimer. You can read the full disclaimer here.

Members will get access to the full list every month, as well as all other Dividendology features.

This month, only 54 stocks made the list.

Let’s dive in.

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1. 🗼 American Tower (AMT)

Wall St. Price Target: $212.00 | Upside: 20.59%

American Tower is one of the largest infrastructure REITs in the world, owning approximately 150,000 communications sites across the United States and international markets.

The business model overall is relatively simple.

Wireless carriers such as AT&T, Verizon and T-Mobile lease space on American Tower’s infrastructure to install their communications equipment.

These leases are generally long-term, include contractual rent increases and produce recurring revenue largely independent of consumer spending.

The economics become particularly attractive when multiple carriers occupy the same tower.

Most of the tower’s operating costs are already covered by the first tenant, which is a huge advantage, as this means additional tenants can generate revenue with very little additional expense.

This gives American Tower a scalable business model with high incremental margins.

The primary long term growth driver is the increase in mobile data consumption.

As consumers stream more video and carriers expand their 5G networks, additional equipment must be installed to increase network capacity.

American Tower’s second-quarter results verify this thesis.

Total property revenue increased 6.3% to $2.69 billion, adjusted EBITDA increased 3.2%, and AFFO attributable to shareholders increased 3.8%.

Management also raised its 2026 outlook, with AFFO per share now expected to reach between $11.00 and $11.17.

However, AFFO per share grew only approximately 1% after excluding currency movements.

The largest headwind was customer churn from DISH, which reduced organic tenant-billings growth by approximately 1.7 percentage points.

When the effects of DISH churn and higher refinancing costs are excluded, management estimates that AFFO per share grew by more than 5% on a currency-neutral basis.

AFFO per share is projected to grow at roughly 4.7% annually through the year 2030.

This REIT now yields 4.07%, with very strong dividend coverage with the AFFO payout ratio at just around 65%.

The underlying business is clearly performing better than the headline growth rate indicates.

American Tower also owns CoreSite, a collection of highly interconnected U.S. data centers.

CoreSite’s cash revenue increased approximately 12%, while management raised its full-year data-center growth forecast from 13% to approximately 15%.

CoreSite completed more new leasing during the quarter than it did during all of 2021, with nine of the world’s ten largest AI companies now deployed within its facilities.

This gives American Tower a second growth engine beyond traditional wireless towers.

American Tower trades at a 15.6x AFFO per share multiple, down nearly 50% over the last 5 years.

Its annualized $7.16 dividend produces a yield of approximately 4.1% and represents around 65% of projected AFFO, leaving the distribution reasonably well covered.

The primary risk that bears would point out is the balance sheet.

Net leverage remains elevated at 4.9 times, making refinancing costs and long-term interest rates significant for future AFFO growth.

They also have around 7% floating rate debt, which isn’t a large amount, but certainly matters in a high rate environment with rates projected to go higher.

Nevertheless, American Tower combines predictable contractual revenue, a sustainable dividend, continued mobile-data growth and rapidly expanding data-center demand.

Wall Street’s $212 average price target implies approximately 21% upside before including the dividend.

2. 🏦 Barclays (BCS)

Wall St. Price Target: $33.50 | Upside: 24.86%

Barclays is one of the largest banks in the United Kingdom, but its business extends far beyond traditional savings accounts and mortgages.

The company operates a diversified collection of businesses that includes:

1. UK consumer banking

2. Corporate lending

3. Wealth management

4. Credit cards

5. Major global investment banking

This diversification allows Barclays to generate revenue from interest on loans, banking fees, credit-card balances, investment-banking activity and financial-market trading.

Barclays has been one of the strongest-performing European banks over the last several years as profitability and capital returns have improved.

The company’s recently released their first-half results.

Total income increased 11% to £16.5 billion, while pre-tax profit increased 17% to £6.1 billion.

Earnings per share increased 24% to 30.7 pence, and return on tangible equity reached 14.8%.

Return on tangible equity, or RoTE, is one of the most important measurements of a bank’s performance.

It compares the profits available to common shareholders with the bank’s tangible common equity, excluding goodwill and other intangible assets.

Banks require substantial equity capital to support their loans and absorb potential losses.

RoTE therefore measures how efficiently management converts that capital into profits.

If a bank consistently earns a RoTE above its cost of equity, it is creating shareholder value and can generally justify trading above tangible book value.

A bank earning less than its cost of equity will often trade below tangible book value because it is failing to generate an adequate return on shareholders’ capital.

Higher RoTE also gives a bank more capacity to grow tangible book value, pay dividends and repurchase shares while maintaining its required capital ratios.

Barclays’ Common Equity Tier 1 ratio ended the quarter at 14.3%, near the top of management’s 13%–14% target range.

That excess capital is increasingly being returned to shareholders.

Barclays announced £2.3 billion of first-half capital returns, 61% more than a year earlier.

This included a new £1 billion repurchase program and approximately £800 million of dividends.

BCS currently yields 2.27% while boasting a three year dividend growth rate of 16.99%!

Keep in mind, like most European dividend stocks, the payouts can fluctuate, and they also payout semi-annually, not quarterly.

Management intends to return more than £15 billion between 2026 and 2028.

This means Barclays’ 2.27% dividend yield significantly understates its total shareholder yield because the company currently returns substantially more capital through buybacks.

However, operating expenses increased 7% during the second quarter, while structural cost actions are expected to reach approximately £600 million during 2026.

Higher investment-banking compensation, competitive pressure on UK deposits and rising credit provisions could also constrain future returns.

At approximately $27 per ADR, Barclays trades at roughly 10 times earnings and 1.2 times tangible book value.

For comparison, NatWest, Lloyds and HSBC trade at a median of approximately 1.72 times tangible book value, but they also generate a higher median RoTE of roughly 19%.

Applying an 18% discount to the peer multiple, reflecting Barclays’ lower RoTE, higher costs and more volatile investment-banking earnings, produces a justified valuation of approximately 1.4 times tangible book value.

That implies a fair value of approximately $31.50 per ADR, representing nearly 17% upside.

A more optimistic 1.5-times multiple produces a value of $33.75, closely matching Wall Street’s target.

Barclays appears undervalued, but reaching Wall Street’s target requires the bank to sustain a 15%–16% RoTE after unusually favorable investment-banking conditions normalize.

3. 🔎 Alphabet (GOOG)

Wall St. Price Target: $430.70 | Upside: 26.03%

Alphabet owns one of the most dominant collections of digital businesses in the world.

This was a company that was left for dead in Q2 of 2025, trading at a P/E of roughly 17x, but has since gone on to return well over 100%.

This was of course due to rapid expansion of the valuation multiple, as the market realized Google was a clear AI beneficiary.

Now the company is seeking to benefit from a different source of return:

Rapid EPS growth.

Google Search remains its primary profit engine, but the company also owns YouTube, Android, Chrome, Google Cloud, Waymo and a rapidly expanding portfolio of artificial-intelligence products.

This gives Alphabet several ways to monetize the continued growth of digital advertising, cloud computing and artificial intelligence.

Revenue increased 24% to $119.8 billion in the recent quarter, which is incredible when you consider the fact this is already a company with a $4T+ market cap.

Google Search revenue grew 17% to $63.3 billion, YouTube advertising increased 13% to $11.1 billion, and subscriptions, platforms and devices revenue increased 15% to $12.9 billion.

Google Cloud was easily the most impressive part of the quarter.

Cloud revenue increased 82% to $24.8 billion, accelerating from 63% growth during the previous quarter.

Operating income nearly tripled to $8.8 billion, while the segment’s operating margin expanded from 20.7% to 35.6%.

Google Cloud’s backlog also reached $514 billion, increasing by more than $50 billion during the quarter.

Management expects slightly more than half of this backlog to convert into revenue over the next two years.

Alphabet also recorded its first external sales of its custom Tensor Processing Unit systems.

This could be a huge development, as it has the ability to transform Google’s proprietary chips from an internal cost advantage into an additional source of revenue.

The company reported GAAP earnings of $9.11 per share, but this figure is extremely misleading.

Approximately $98 billion of Alphabet’s quarterly earnings came from gains on private investments such as SpaceX and Anthropic.

These gains are not recurring operating earnings and could reverse if the value of those investments declines.

Despite the exceptional operating growth, Alphabet shares sold off because of the amount being spent to build its AI infrastructure.

Capital expenditures reached $44.9 billion during the quarter, exceeding $39.1 billion of operating cash flow.

As a result, Alphabet generated negative free cash flow of $5.9 billion, which is its first negative quarter since becoming a public company.

Management also raised its 2026 capital-spending guidance to between $195 billion and $205 billion, with spending expected to remain elevated afterward.

This in no way represents immediate financial distress.

Alphabet still ended the quarter with approximately $130 billion of net cash, including leases.

The obvious concern is whether future AI and Cloud profits will produce acceptable returns on the enormous amount of capital being invested.

From a valuation perspective, Google looks incredibly cheap at first glance.

Paying 17x earnings for Google would be an incredible deal (as we saw last year).

Unfortunately, the much lower reported P/E of approximately 17 times is distorted by the unrealized investment gains that significantly increased GAAP earnings without increasing operating cash flow.

Google actually trades at roughly 25.6 times next-12-month normalized earnings.

However, even at that valuation, Google is still trading roughly in line with its historic valuation multiple.

Wall Street’s projected 26% upside depends on Cloud remaining exceptionally strong, Search successfully adapting to generative AI and capital expenditures eventually normalizing.

Google’s future returns entirely depend on whether its historic AI investment produces equally historic cash flows.

Now, let’s dive into the full list of dividend stocks with the most upside according to Wall Street.

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Every quarter, the world’s best investors quietly reveal exactly what they’re buying.

Most people never see it until it’s already too late.

Carbon Finance turns those filings into clean infographics you can read in five minutes, so you finally see where the money is going before the crowd catches on.

Over 50,000 investors already do. And it’s completely free, every Sunday.

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🕵️ Stealing From Super Investors

Do you know what one of the biggest winners in my portfolio was a few years ago?

A stock many have never heard of.

Jefferies Financial.

I was up over 125% in just over a year, with a yield on cost of over 5.10%.

The reason I discovered this stock?

Stealing ideas from Super Investors.

Super Investors are investors with over $100M in assets under management.

Every 3 months, they are required by law to reveal all of the moves they’ve been making in their portfolio.

This most recent quarter, they made some shocking moves.

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🔍 Dividendology Database

One of the best features of Dividendology.com?

The Dividendology Database

While we primarily use this database for alternative income asset classes, like:

• REITs

• BDCs

• Option Income ETFs

One of the things we also track in this database is the buying history of dividend stocks for Super Investors.

To my knowledge, this is the only resource for tracking these types of purchases on the internet.

While each quarter gives us insight into where capital is moving-

More importantly, it reveals the underlying trends of where the smart money has been moving over longer periods of time.

This is where the real insights come from.

Texas Instruments is the perfect example, and this quarter the story finally has an ending.

Texas Instruments was:

• The 6th most frequently bought stock in Q1 2025

• The 12th most frequently bought stock in Q2 2025

• The 7th most frequently bought stock in Q4 2025

Super Investors were accumulating it quietly while the financial media was busy talking about the MAG7 stocks.

Then they stopped… After the stock had an incredible run.

TXN has now failed to make the list for two consecutive quarters.

And look at what the stock did after they walked away.

TXN ripped over 53% in the second quarter alone, peaking at $332.

They accumulated it between roughly $150 and $200.

📉 Buying What Everyone Hates

In 1939, with Europe collapsing into war, a 26 year old named John Templeton did something that looked insane.

He borrowed money.

Then he bought 100 shares of every single stock on the U.S. exchanges trading below one dollar.

104 companies, most of which the market thought were headed for bankruptcy.

Four years later, that basket was up roughly 400%.

He went on to run the Templeton Growth Fund from 1954 to 1992, compounding at 14.5% annually versus 11.6% for the S&P 500.

A $10,000 investment became roughly $2 million.

He believed in buying during peak pessimism.

Keep that in mind as you read this quarter’s data…

Because this is exactly what Super Investors did in the recent quarter.

💰 Super Investors Top 10 Buys

Before we dive into the trends in where money is moving, let’s review the top purchases.

These were the top 10 most bought dividend stocks by Super Investors in the most recent quarter:

1. MSFT — Microsoft 🖥️

2. META — Meta Platforms 📱

3. V — Visa 💳

4. SPGI — S&P Global 📈

5. GOOG — Alphabet 🔎

6. DIS — The Walt Disney Company 🏰

7. COF — Capital One Financial 🏦

8. TMO — Thermo Fisher Scientific 🔬

9. DHR — Danaher 🧪

10. CMCSA — Comcast 📺

Below is the full list of the 50 Most Bought Dividend Stocks by Super Investors:

Members of Dividendology can access the entire database history at anytime on Dividendology.com.

Now, let’s look at the trends.

📊 Where the Money is Moving

Let’s review where capital is flowing right now.

The most widely bought sector by Super Investors this quarter was technology, with 14 of the top 50 names.

This breaks a two quarter streak of financials leading the list.

But the headline number is misleading.

Because this is not the technology you think it is.

• Nvidia fell from the 7th most bought stock last quarter all the way down to 30th

• ASML dropped off the list entirely

• Apple, which was the 3rd most bought stock two years ago, is now nowhere to be found

Super Investors were not buying the popular AI winners that everyone has had on their watchlist over the last year.

Instead, they were buying the companies the market has deemed is at risk of disruption due to AI.

Look at this list:

• SPGI — S&P Global, the 4th most bought stock, down over 21% in the last year

• ACN — Accenture, down over 26% in the last year (down 50% at one point)

• INTU — Intuit, down nearly 47% in the last year

• SAP — down over 18%

• EFX — Equifax, down over 20%

• CTSH — Cognizant, down nearly 12%

• CRM — Salesforce, down over 14% (down 39% at one point)

All of these are companies in software, IT services, and financial data.

This is certainly not a one quarter fluke either.

I went back and looked at the database and noticed an interesting trend.

The amount of these “AI victim” stocks on the top 50 list has climbed for four straight quarters now:

• Q2 2025: 3 names

• Q3 2025: 6 names

• Q4 2025: 7 names

• Q1 2026: 9 names

• Q2 2026: 9 names

Three of them were bought at the highest ranking they have ever held in this database.

S&P Global at 4th place, when its previous best was 17th.

SAP at 29th.

Cognizant appearing for the very first time.

Every single one of these stocks has seen a major bounce back in their share price from their Q2 bottom.

You can see the time period Super Investors were adding these stocks highlighted in the blue below:

The most notable climb was Accenture.

We highlighted Accenture as a unique opportunity in late June, when the stock was trading at $127 a share.

We used a reverse DCF model to reveal the fact the market was pricing in -9.8% free cash flow growth over the next decade.

This was peak pessimism.

The stock is now up over 50% since.

Intuit is up over 41% since quarter end.

Salesforce is up over 34%.

ADP is up nearly 26%.

S&P Global is up over 12%.

Over that same stretch, the S&P 500 returned roughly 2% and the technology sector was actually down.

💻 Big Tech

There is also something happening at the very top of this list that has never happened before.

The top 3 most bought dividend stocks are not just identical, but in identical order, for the third consecutive quarter:

1. Microsoft

2. Meta Platforms

3. Visa

I went back through nine quarters of data and there is no other instance of the same three names holding the same three spots twice in a row, let alone three times.

Super Investors were certainly averaging down, as Microsoft fell over 23% during the first quarter of this year while sitting in the number one spot.

The issue investors previously had was despite the fact MSFT had a massive backlog, most of that backlog was tied to OpenAI, creating customer concentration risk.

But Microsoft’s AI growth is now becoming more diversified.

Nearly 90% of its full-year cloud revenue came from customers outside frontier-model companies such as OpenAI.

Microsoft is now a much more diversified company.

Microsoft is up nearly 29% since quarter end, the best move of anything in the top 10.

Visa is sitting at a fresh 52 week high.

Meanwhile, Meta is the one that hasn’t worked (yet).

It’s down over 25% in the last year, nearly 30% off its high, and it has kept falling even after quarter end.

Also worth noting, there are only six companies that have appeared in all nine quarters of this database:

Microsoft, Meta, Visa, Alphabet, Taiwan Semiconductor, and UnitedHealth.

Only 27 of the 50 names carried over from last quarter.

🗂️ Use The Database!

By using the Dividendology Super Investor Database, we were able to identify the exact valuation range for TXN that Super Investors found attractive-

And we were able to watch what happened when they stopped buying.

As you go through the database, look for trends that may answer questions, like:

• Which “AI victim” stocks are Super Investors quietly accumulating before the narrative turns?

• Which stocks have appeared in every single quarter, and what does that tell us about durability?

• When Super Investors abandon a top holding, is that a warning or an opportunity?

• Which sectors are seeing capital rotation?

• Which stocks can we identify clear valuation ranges for?

The real advantage truly isn’t just analyzing the recent quarters buys-

It’s in identifying the trends.

If you want to get access to the Dividendology Database, as well as all the features mentioned below, you can do so here:

Subscribe now

Check out these resources:

Tickerdata 🚀 (My automated spreadsheets and instant stock data for Google Sheets!)

Interactive Brokers 💰 (My favorite place to buy and sell stocks all around the world!)

Seeking Alpha 🔥 (Research stocks $30 off! + 7 day free trial)

HYSA 📊 (Get Access to the Best High Yield Savings Accounts!)

Disclaimer: As a reader of Dividendology, you agree to our disclaimer. You can read the full disclaimer here.

Which means investors with over $100M in assets under management are having to file their form 13Fs, revealing all the moves they made last quarter.

What was most interesting about Ackman’s moves?

The fact he added four companies that sit at the center of the global financial system:

• Mastercard

• Visa

• S&P Global

• Intercontinental Exchange

All four of these stocks have underperformed the market in the last year.

While each of these companies is different in nature-

They have some incredibly similar characteristics.

They are all capital-light financial toll roads businesses.

Every time a payment is processed, a financial benchmark is licensed, a credit rating is issued, or a trade is completed, one of these companies collects a small fee.

Here’s everything you need to know about why Ackman added these dividend growth stock positions to his portfolio.

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📈 Sources of Returns

Let’s use Mastercard as a case study.

Nearly 9 months ago, I released a video stating that Bill Ackman was likely to buy two stocks in particular:

1. Meta

2. Mastercard

Since that video, he has added both of those to his portfolio.

How did I know this was likely to happen?

The true answer is that I deeply understand his investing philosophy by reading his lengthy letter’s to shareholders.

But the short answer is this:

Ackman views investment’s through the lens of sources of returns.

Over the long term, a stock has three primary sources of return:

1. Earnings-per-share growth

2. Dividends

3. Changes in the valuation multiple

Dividends are the most direct source of return.

They represent actual cash paid to shareholders and can provide positive returns even when earnings stagnate or valuation multiples contract.

However, the two primary engines of long-term outperformance are EPS growth and multiple expansion.

If a company grows EPS by 15% annually, its share price will follow that growth, assuming its valuation multiple remains unchanged.

If the valuation multiple also expands, investors receive an additional boost.

The math behind this is simple.

Let’s say we have a stock that grows earnings per share at 15% per year.

At a 15% annual growth rate, earnings would double in about 4.8 years

Assuming that:

• The stock doesn’t pay dividends

• The P/E multiple stays the same

This means that the share price of the stock over the 4.8 year time period would double as well.

A 100% gain in just 4.8 years!

But let’s run this scenario one more time…

This time we will assume the stock is trading at a price to earnings multiple of 15.

Like above the stock continues to grow earnings per share at a rate of 15%.

But at the end of the 4.8 year period, the company is trading at a P/E multiple of 25.

To review:

• EPS grows at 15%

• The P/E multiple expands from 15 to 25

This means the stock would provide a total return of 234% in just 4.8 years!

Share repurchases are not treated as a separate source of return in this framework because their benefit is already captured through EPS growth.

When a company reduces its outstanding share count, its earnings are divided across fewer shares, accelerating earnings growth on a per-share basis.

But these sources of return are not equally dependable.

A company can trade at a lower valuation for years.

Multiple expansion is never guaranteed.

Earnings growth, on the other hand, is ultimately what drives intrinsic value.

Ackman made this exact point in Pershing Square’s second-quarter shareholder letter:

“In the short term, stock prices are often, and sometimes materially, disconnected – either favorably or unfavorably – from intrinsic values. Over the long term we expect long-term growth in EPS and economic earnings to drive increases in the intrinsic value and stock prices of our holdings.”

That is the foundation of the Mastercard investment thesis.

Pershing Square believes it purchased a high-quality company with the ability to compound earnings at a double-digit rate while trading below its historical valuation.

In other words, Mastercard potentially has both engines of outperformance working in its favor:

• Continued earnings growth

• Potential multiple expansion

But with that being said, Mastercard’s capital-allocation strategy may be the most misunderstood, yet impressive parts of the entire business.

🧭 The Five Uses of Capital

I state this all the time, and will continue to do so.

Every company has five basic ways it can allocate its free cash flow:

1. Reinvest in the existing business

2. Make acquisitions

3. Pay down debt

4. Repurchase shares

5. Pay dividends

Management’s most important responsibility is deciding how much capital should flow into each category.

The correct decision depends on the opportunities available.

If a company can reinvest capital at exceptionally high rates of return, it should reinvest.

If it can purchase another business at an attractive valuation and generate returns above its cost of capital, it should consider an acquisition.

But if neither opportunity exists, management should return the excess cash to shareholders.

Holding unnecessary cash or forcing capital into mediocre projects destroy’s shareholder value.

This is what makes Mastercard so unique.

As we will see below, the company can continue growing at a double-digit rate without reinvesting most of its free cash flow.

💳 Mastercard’s Unusual Advantage

In 2025, Mastercard generated $16.9B in free cash flow.

But how did they allocate this capital?

Mastercard had a 16.3% free cash flow payout ratio in 2025, meaning 16.3% of their free cash flow used used to pay dividends.

This is where most investors stop their capital allocation research.

You can often times back into how much capital was used to buyback shares by reviewing changes in shares outstanding, or sometimes the company will state this in their financials.

Now look at how management allocated that cash:

• $11.73 billion spent repurchasing shares

• $2.76 billion paid in dividends

• $14.48 billion returned to shareholders in total

That means Mastercard returned approximately 86% of its free cash flow through dividends and buybacks in 2025!

Nearly all of their free cash flow is being returned to shareholders.

Is returning this much cash a red flag?

Often times it is.

If a company distributes nearly all of its free cash flow because its business has stopped growing, the payout can be a warning sign.

A mature company may have no attractive reinvestment opportunities, leaving dividends and buybacks as the only realistic uses of its capital.

But what if a company could return most of its cash while still expanding earnings at a double-digit rate?

That’s exactly what Mastercard does.

Its payment network is already built.

The company does not have to manufacture every Mastercard-branded card, fund the underlying consumer loans, or construct a physical location every time it enters a new market.

Instead, banks issue the cards, merchants accept them, and Mastercard operates the network connecting both sides.

As more consumers use digital payments and more merchants join the network, Mastercard can process more transactions across much of the same infrastructure.

That is the power of a network effect.

• More acceptance makes the network more useful to consumers.

• More consumers make the network more valuable to merchants.

• More transactions generate additional data.

• More data strengthens fraud detection and other value-added services.

• Better services make the network even more difficult to replace.

Mastercard does not need to retain most of its free cash flow to build factories, purchase inventory, or finance customer loans.

That allows revenue and earnings to grow much faster than the company’s physical capital base.

💎 The Power of High ROIC

This brings us to return on invested capital.

ROIC measures how efficiently a company generates after-tax operating profit from the capital invested in its business.

The basic formula is:

ROIC = Net Operating Profit After Tax ÷ Invested Capital

Think of a company as a vehicle.

• Invested capital is the fuel

• Operating profit is the distance traveled

• ROIC measures how efficiently the vehicle converts fuel into distance

  

The higher the ROIC, the more profit the company can generate from each dollar invested.

Mastercard’s ROIC reached an exceptional 48.91% in 2025.

In simple terms, this means Mastercard generated nearly $49 in after-tax operating profit for every $100 of capital invested in the business.

This becomes even more powerful when we connect ROIC to the company’s reinvestment rate.

The relationship between the two can be expressed with a simple formula:

We already established that Mastercard generated approximately $16.912 billion in free cash flow during 2025 and returned $14.483 billion through dividends and share repurchases.

That left approximately $2.429 billion of free cash flow that was not returned to shareholders.

Mastercard’s estimated reinvestment rate can therefore be calculated as:

In other words, Mastercard retained only around 14.4% of its free cash flow after accounting for dividends and buybacks.

Now multiply that reinvestment rate by Mastercard’s ROIC:

Based on this simplified framework, Mastercard could theoretically grow its underlying business by approximately 7% per year while reinvesting less than 15% of its free cash flow.

That is the power of high ROIC.

A company earning a 10% ROIC would need to reinvest approximately 70% of its capital to generate the same 7% growth.

Mastercard can potentially generate that growth while returning approximately 86% of its free cash flow to shareholders.

It gets far more growth from every dollar retained.

There is also an important caveat.

This is a simplified cash-retention calculation, not the strict accounting definition of a reinvestment rate.

Mastercard invests heavily in technology, cybersecurity, employees, artificial intelligence, customer incentives, and product development.

Much of that investment is recorded as an operating expense rather than appearing as capital expenditures on the cash-flow statement.

That means our calculation technically understates how much Mastercard is truly reinvesting for future growth.

But the broader takeaway remains unchanged:

Mastercard does not need to retain most of its free cash flow to keep growing.

This is what separates Mastercard from a traditional capital-intensive company.

It can return nearly all of its free cash flow to shareholders without starving the business of the capital it needs to grow.

That is the defining characteristic of a capital-light compounding machine.

🚀 Engines of Outperformance

Bill Ackman added Mastercard when it was trading at it’s lowest P/E multiple in over 5 years.

As mentioned above, this allows him to benefit from both engines of outperformance.

Assuming Mastercard’s EPS growth comes in slightly below analysts projections, and the valuation multiple expands just slightly closer to its historic average-

Compounded returns are sitting above 15%!

This is a great example of a stock that benefits from both of the engine’s of outperformance.

⚠️ The Risks

The market has had two major concerns for Mastercard as of late:

1. Stablecoins

2. Agentic commerce

Here’s what investors are missing.

The world will still have a desperate need for payment verification and fraud prevention.

Here’s a few key quote from Mastercard CEO, Michael Miebach-

• “By 2030, the amount of fraud and cyber risk-driven damage is going to amount to $15.6 trillion. If cyber risk were a country, that would be the third largest economy in the world.”

• “We’re the operating system of the digital economy. An operating system should have a security layer. That’s exactly what we do. But it also has a money movement layer--across stablecoins and account-to-account and cards. We move value, your hard-earned money.”

• “You’re company A, I’m company B, and we just want to do machine-to-machine payments with each other. But your choice is stablecoin A and my choice is stablecoin B. Who sits in the middle and drives interoperability, makes sure all of this connects and is not a plate full of spaghetti? Mastercard’s.”

Mastercard is well positioned to not only manage what some see as risks, but potentially benefit from them.

🛒 Bill Ackman’s Buy

A stock returning nearly 86% of its 2025 free cash flow through dividends and share repurchases, while also still growing EPS at roughly 15% moving forward is incredibly rare.

But that is exactly what Mastercard has done.

What’s interesting, is Mastercard shares many of the same qualities as Bill Ackman’s other financial purchases:

• S&P Global

• Visa

• ICE

All four are capital light businesses that require little reinvest back into the business to fund growth.

And every additional transaction, credit rating, financial-data subscription, or index-linked product can generate more revenue without requiring a proportional increase in invested capital.

This allows them to produce exceptional returns on invested capital and convert a significant portion of their earnings into free cash flow.

In fact, these qualities are quite similar to the qualities our Dividend Growth Portfolio possesses.

If you want to get access to our Dividend Growth and High Yield Portfolio, as well as all the features mentioned below, you can do so here:

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See you soon!

Dividendology

Mention the word dividend, and a lot of investors immediately assume one thing:

Underperformance.

There’s just one problem.

The historical data doesn’t support that conclusion-

At least not when we’re talking about dividend growth investing.

In fact, the data is quite shocking.

Here’s what you need to know.

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💰 Capital Allocation

Do you know what the most important task of management is?

It’s capital allocation.

Ultimately, the dividend a company pays out tells you very little about a company without considering their entire capital allocation framework.

As a reminder, a company has five different ways it can allocate its free cash flow.

It can:

1. Reinvest in the business

2. Make acquisitions

3. Pay down debt

4. Repurchase shares

5. Pay dividends

The goal of management is to decide the best way to allocate that capital.

Of course, if a company uses all of their capital to pay out dividends, they cannot reinvest back into the business, making it more difficult to grow free cash flow in subsequent years-

Which actually makes it more difficult to grow dividends in the future.

But wait a second-

Doesn’t this mean if a stock stopped paying a dividend and reinvested all of its capital, then free cash flow would grow faster leading to more share price appreciation?

Ⓜ️ The Meta Case Study

When Meta announced plans to start paying dividends in early 2024, many investors were surprised.

Here was a company with exceptional profitability, a five-year revenue CAGR of 18.4%, over $91 billion in current assets, and minimal debt.

So why start paying a dividend?

Because the company was generating so much free cash flow, it became impossible to reinvest all of it at high rates of return.

Over the prior four to five years, Meta burned through $45 billion trying to build Reality Labs, their metaverse division, which turned out to be unprofitable.

That’s $45 billion of capital deployed at returns well below their cost of capital.

This is the critical point:

Even the best companies can destroy shareholder value if they reinvest too much capital into low-return projects.

If Meta would have paid out that $45 billion in dividends instead of reinvesting it into low ROI projects, it would have actually increased the company’s total return!

Proper capital allocation always maximizes shareholder returns.

The reality is that a steadily rising dividend can sometimes be a symptom of an exceptional business, rather than a limitation on one.

Think about what a rising dividend signals:

• Management is confident future cash flows will remain strong

• The company can fund growth and return excess cash to shareholders

• Free cash flow is consistently growing

But all of this still doesn’t tell the whole story.

Now that we have a basic understanding of capital allocation, we can start to make sense of some ‘eye-opening’ data…

📊 The Shocking Long-Term Data

Look at how the Dow Jones U.S. Dividend 100 Index is constructed.

The index doesn’t simply grab the 100 highest-yielding stocks in America.

S&P Dow Jones Indices requires a history of consistent dividend payments and then evaluates companies using measures including:

• Cash flow to total debt

• Return on equity

• Dividend yield

• Five-year dividend growth

S&P explicitly describes the objective as finding companies capable of producing “quality yields.”

Dividend growth investing is quality investing.

Here’s where things get really interesting.

The Dow Jones U.S. Dividend 100 Index has a documented base date of December 31, 1998 and a base value of 1,000.

The index itself wasn’t officially launched until August 31, 2011, so the period before that is backtested rather than live performance.

But the historical index methodology allows us to examine how this strategy would have performed across multiple market environments.

Using the August 7, 2026 total-return index level I pulled, here’s what the full period looks like:

Read those numbers over a near 30 year time period again.

A $10,000 investment in the dividend strategy would have grown to approximately:

$185,799.

The same amount invested in the S&P 500 would have grown to approximately:

$103,982.

That’s an $81,000 difference.

And what’s even crazier is how small the annual difference initially looks.

11.17% versus 8.85%-

Which is just 2.3 percentage points per year.

But compound 2.3% of annual outperformance for almost three decades and suddenly you’re talking about nearly 80% more ending wealth.

S&P Global reached a similar conclusion in its own research.

In one study covering June 2001 through June 2023, the Dow Jones U.S. Dividend 100 Index produced an 11.7% annualized return, compared with 10.2% for the broader Dow Jones U.S. stock market benchmark-

Which means that the dividend strategy still outperformed… even if we don’t include the dot com bubble market crash.

So where does that outperformance come from?

📈 Dividend Growth Doesn’t Win Every Year

One of the biggest mistakes investors make is judging a strategy based on whatever has worked over the last three years.

Every investment strategy goes through periods of underperformance.

This is obvious to most investors.

Dividend growth investing can absolutely underperform-

Especially during extremely strong bull markets.

Imagine an environment where investors are willing to pay almost any valuation for the fastest-growing technology companies.

Those companies explode higher.

Meanwhile, a profitable healthcare company growing earnings at 8% or 9% annually looks boring by comparison.

Dividend growth falls behind.

But as we learned above, as well as in this study from Hartford Funds, is that dividend growth outperforms over full market cycles.

But where that outperformance comes from is interesting.

From 1978 through 2023, dividend growers and initiators averaged a loss of just 11.7% during bear markets, compared with:

• −18.2% for dividend cutters and eliminators

• −19.0% for the equal-weighted universe

• −30.3% for non-dividend-paying stocks

The trade-off is that non-dividend payers produced the strongest average returns during bull markets.

But over the full period, dividend growers still generated the highest overall average return at 13.1%.

🛡️ Downside Example

Here’s a great example.

The S&P 500 finished 2022 with roughly an 18% loss, its worst year since 2008.

DGRO, the iShares Core Dividend Growth ETF, declined only 7.85% that year.

That’s roughly 10 percentage points of outperformance in a single year.

This is true for 2018, as well as for most down years the S&P 500 has.

What’s particularly impressive for DGRO, is the performance it has posted over the last decade.

Despite the fact we’ve been operating in a major bull market over the last decade-

DGRO has actually outperformed the market:

• DGRO: 256.23%

• S&P 500: 254.96%

But even this outperformance doesn’t hit one of the ultimate benefits of dividend growth investing.

⏳ Sequence Risk

I discuss this frequently, but it’s a ‘must understand’ concept.

Look at this comment I saw on YouTube the other day:

The investor above, who was clearly relying on the 4% rule, completely lost their ability to stay retired during the 2000s as his portfolio dropped by 50%.

The 4% rule says a retiree can withdraw 4% of their portfolio in year one, then increase that amount with inflation.

Historically, that strategy succeeded more than 95% of the time over 30-year periods.

But that headline number hides two major risks:

1. Valuation

2. Sequence risk

The historical failures of the 4% rule occurred when investors retired with stocks at expensive valuations.

Keep in mind, the CAPE ratio is near historically extreme levels.

And even if valuations eventually normalize, sequence risk never disappears.

Sequence risk is what happens when poor returns hit early in retirement while you’re simultaneously selling shares to fund your lifestyle.

Two retirees can earn the exact same average return and end up with dramatically different outcomes simply because of when the bad years occur.

That’s why I prefer a different approach:

Build a portfolio that pays for your retirement without forcing you to sell shares.

If your dividends cover your expenses, a market crash becomes much less threatening. You can continue collecting income while allowing your shares time to recover.

Look at this recent example:

From November of 2021 to November of 2023, the S&P 500 was down 3.38%.

Inflation was up 10% during that time period.

But guess what?

S&P 500 dividends grew by 17% during that period.

This is an absolutely imperative advantage to dividend growth investing that investors must understand.

🔥 But Wait, There’s More!

We now have a much deeper understanding of dividend growth investing, and how:

• It outperforms over full market cycles

• Eliminates sequence risk

• Dividend income can continue growing even when stock prices stagnate

• A dividend does not automatically mean sacrificing growth

But there is one more element we must point out:

Volatility.

Not only has dividend growth historically outperformed, it has done so with less volatility.

Dividend growth investing has historically offered one of the rare combinations investors are always searching for…

Stronger returns, lower volatility, and a growing stream of income.

🎯 Our Dividend Growth Portfolio

Dividend growth investing is incredibly attractive-

But most investors are still yet to recognize the immense advantages this strategy has.

We’re still in the process of building out our Dividend Growth Portfolio.

What does our portfolio roughly look like right now?

In a market that many would argue is overvalued, we’ve been able to add positions to our portfolio that:

• Are fundamentally healthier than the S&P 500

• Are growing revenues and EPS at a faster rate than the S&P 500

• Trade at a more attractive valuation than the S&P 500

And of course, our portfolio has a higher yield than the S&P 500 while growing dividends at a substantially faster rate.

Let’s review our current holdings:

Read more

This is the end result of 100’s of hours of research every month.

It’s time to dive in.

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1. 🏦 Hercules Capital (HTGC)

It’s continued to be a brutal year for the BDC market.

The VanEck BDC Income ETF is down 6% this year.

Entering into 2026, this sector was facing two primary issues:

1. The threat of rate cuts

2. Overexposure to the software sector in their loan portfolio

Entering into the year, the market was pricing in 3 potential rate cuts in 2026.

Now, the opposite has happened, with the market pricing in at least one rate hike this year.

This is generally good news for BDC’s, as the majority of the loans in their portfolio are floating rate.

So naturally, higher rates mean BDCs can generate more net investment income.

However, the market still seems to be quite concerned about the fact that many BDCs have heavy exposure to software companies in their portfolio-

Which are companies that are potentially at risk of disruption with the threat of AI.

This has been the primary concern for Hercules Capital this year, with over 1/3rd of their loan portfolio tied to software/tech companies.

Despite this, it appears the overall strength of Hercules Capital’s portfolio has continued to grow stronger this year.

During Q2 2026, Hercules generated $0.50 per share of net investment income, comfortably covering its $0.40 regular quarterly dividend by 125%.

The company also pays a $0.07 supplemental dividend, bringing its annualized distribution to roughly $1.88 per share.

Keep in mind, this BDC has a forward yield of 11.03%.

But of course, more importantly, credit quality remains particularly impressive.

Only 0.1% of HTGC’s portfolio is currently made up of troubled loans that have stopped generating interest income, highlighting the company’s exceptionally strong credit quality.

Meanwhile, total investment income increased 8.5% year over year to $149.1 million, while the debt portfolio grew roughly 10%.

HTGC currently trades around 1.35x–1.37x NAV, which is certainly not cheap compared with most BDCs.

However, that premium remains well below historical levels, and is likley justified considering:

1. The exceptional credit quality of the portfolio

2. NAV per share increasing to $12.15 per share during the quarter

3. The 11% yield being well covered by net investment income

Our model High Yield Portfolio has performed extremely well in 2026.

Not only did this portfolio outperform, but it:

• Had lower volatility (standard deviation)

• Had a lower maximum drawdown

• Had a stronger Sharpe Ratio

This is in part due to the fact that we were able to wisely avoid entering the BDC market over the last year.

However, we are now closely monitoring a select few BDCs as credit quality starts to improve across the sector.

2. 📡 AT&T (T)

If you’ve been in the dividend space long enough, you probably remember when AT&T was everyone’s favorite dividend stock.

Then they overloaded their balance sheet with debt, growth slowed, and they had to reduce their dividend.

But as a result of the company restructuring over the last few years, AT&T is now in a drastically different position, and the dividend itself is much more attractive.

The company yields over 4.6%, while only using 42% of its free cash flow to payout the dividend.

It’s certainly good news there is ample free cash flow left over after the dividend, because the company is still in the process of deleveraging the balance sheet.

AT&T still has a $126.4 billion net debt balance.

Management is targeting leverage of approximately 2.5x EBITDA over the next several years, and continued debt reduction will make the investment case considerably stronger.

During Q2 2026, AT&T added more than 1 million Advanced Connectivity customers, including a record 367,000 fiber subscribers.

Fiber net additions increased 36% year over year, while the company also added more than 430,000 postpaid phone customers.

Overall revenue increased 2.6% year over year to $31.6 billion, while Advanced Connectivity service revenue grew 5.1%.

The company’s expanding fiber network remains one of the biggest reasons I find AT&T attractive at these prices.

Following its acquisition of Lumen’s fiber assets, AT&T now reaches more than 38 million fiber locations and plans to expand that footprint to approximately 60 million locations by the end of the decade.

With that being said, AT&T is particularly interesting at today’s valuation, due to the fact that EPS growth is expected to pick up over the next four years-

Double-digit EPS growth for a stock trading at a forward P/E multiple of just 10.14 is quite impressive.

If shares eventually rerate closer to 12x earnings, AT&T could be worth approximately $31 per share, providing meaningful upside in addition to the dividend.

3. 🎰 VICI Properties (VICI)

VICI is down 12% over the last 5 years (not including dividends), and currently yields nearly 6.8%.

Despite this, the company has continued to grow AFFO per share (the measure of intrinsic value for REITs) every year at a healthy rate, while also paying out a yield of 5%-7%.

The dividend remains well covered at a 75% AFFO payout ratio.

Of course, there are three primary concerns for VICI:

1. Tenant concentration and quality

2. The rise of online gaming

3. Las Vegas Visitor traffic

The market views each of these as a potential concern of their own.

Earlier this week, I interviewed the CEO of VICI Properties, Ed Pitoniak, to address each of these three concerns.

If you have any interest in VICI whatsoever, I highly suggest you watch this video first:

Be sure to subscribe to the podcast on YouTube or Spotify so that you don’t miss any new interviews with CEOs and fund managers.

To give you just a little insight-

The data through the first half of 2026 suggests that conditions have largely stabilized rather than deteriorated.

Total Las Vegas visitors are up 0.2% year over year, while hotel occupancy is unchanged at 82%.

More importantly, average daily room rates are up 3.5%, RevPAR (Revenue Per Available Room) is up 3.5%, and gaming revenue has increased 2.5% year over year.

The best way to look at VICI is through the lens of a dividend discount model.

Assuming VICI can grow their dividend at just 3% (which is below their projected AFFO per share growth)-

VICI would have around 24% upside from current prices.

Now, let’s jump into this month’s full list.

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It quickly became the most popular article I have ever released.

That makes sense.

With markets remaining volatile and retirement becoming increasingly expensive, investors are searching for dependable investments capable of producing meaningful income.

Now that we are more than halfway through 2026, it is time to revisit the original list.

For each investment, we need to answer three questions:

1. How has it performed?

2. Is the distribution still sustainable?

3. Does the investment remain attractive today?

Let’s dive in.

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10. 🛢️ Energy Transfer (ET)

Current yield: Approximately 6.60%
2026 total return: Approximately 28.2%

Energy Transfer has been the strongest-performing investment on the list. Its unit price has increased approximately 24.2%, while distributions have lifted its total return to 28.2%.

Investors entered the year with an 8.08% yield, which appeared unusually high considering the strength of the underlying business.

Energy Transfer generated approximately $2.38 per unit of distributable cash flow in 2025 while paying around $1.34 per unit in distributions, providing substantial coverage.

The partnership has also announced three quarterly increases during 2026. Its payout increased from $0.3325 per unit to $0.3350, then $0.3375, and most recently $0.3400.

That marked its 19th consecutive quarterly distribution increase.

Most of Energy Transfer’s earnings are generated through fee-based infrastructure operations rather than direct exposure to commodity prices, making its cash flows more stable than those of traditional energy producers.

The valuation is less attractive following the rally, but the distribution remains well covered and continues growing.

9. 🎰 VICI Properties (VICI)

Current yield: Approximately 6.74%
2026 total return: Approximately -2.0%

VICI Properties has been one of the weaker performers on the list, but is still only down by 2%.

The decline has increased VICI’s yield from 6.39% at the beginning of the year to approximately 6.74%.

Despite the weak share-price performance, the company’s underlying fundamentals remain relatively healthy.

Adjusted funds from operations per share, the primary earnings metric for REITs, has continued to grow.

VICI has historically generated roughly 7% annual AFFO-per-share growth across several multiyear periods, with slightly lower growth projected through 2029.

The quarterly dividend has remained at $0.45 per share during 2026.

However, VICI has historically announced its annual dividend increase in September, and its AFFO payout ratio remains reasonable.

The main risks include substantial exposure to Las Vegas, gaming operators, and elevated interest rates.

Still, VICI continues collecting contractual rent, and its valuation has fallen while cash flow has grown.

I’ll be interviewing VICI CEO Ed Pitoniak in the coming days to dive deeper into the situation.

8. 📈 Infrastructure Capital Equity Income ETF (ICAP)

Current yield: Approximately 10.30%
2026 total return: Approximately 9.6%

ICAP has generated a 9.6% total return while maintaining a double-digit distribution yield.

Unlike many covered-call ETFs, ICAP does not write options across its entire portfolio.

The fund generally maintains option coverage on approximately 30% to 40% of its holdings, leaving a meaningful portion of the portfolio’s upside uncapped which allows the fund to take part in the upside.

Management focuses on companies with growing earnings, strong free cash flow, sustainable dividends, manageable payout ratios, and reasonable valuations.

It can then write covered calls on positions it believes are approaching full value.

ICAP has also increased its monthly distribution during 2026.

The fund began the year paying $0.240 per share, raised the payment to $0.245 in March, and increased it again to $0.250 by June.

A fund that yields double-digits, takes part in the upside, and grows dividends over time is an incredible combination.

The fund’s reported expense ratio appears unusually high because it includes financing costs associated with leverage.

Its underlying management fee is closer to 0.8%.

Little leverage is used, but it does add risk during declines.

7. 🏦 Ares Capital Corporation (ARCC)

Current yield: Approximately 9.93%
2026 total return: Approximately -0.7%

ARCC has seen a small total loss of only 0.7% so far in 2026-

But the VanEck BDC Income ETF is down over 9% this year.

It’s outperforming it’s peers, but the BDC market has been hammered this year.

The decline has increased ARCC’s yield from 9.39% at the start of the year to approximately 9.93%.

Ares Capital has maintained its regular quarterly dividend at $0.48 per share for five consecutive quarters, with healthy dividend coverage for a BDC.

The stock has also traded near or slightly below tangible book value.

At approximately 0.99 times tangible book value, investors are paying about $0.99 for every dollar of tangible net assets.

Historically, ARCC has often commanded a premium because of its scale, management team, and track record.

The primary concern is its roughly 24% portfolio exposure to software companies, which could face disruption from artificial intelligence.

ARCC remains a high-quality BDC, but credit performance deserves close monitoring.

6. 🛢️ Western Midstream Partners (WES)

Current yield: Approximately 8.00%
2026 total return: Approximately 24.1%

Western Midstream has been another major winner. Its unit price has increased approximately 17.1%, while distributions have raised its total return to 24.1%.

The partnership entered 2026 yielding approximately 9.16%.

A yield that high suggested the market was pricing in considerable risk, potentially including a future distribution reduction.

However, Western Midstream entered the year with:

• Investment-grade credit

• Relatively low leverage

• Healthy distribution coverage

• Growing distributable cash flow

The partnership increased its quarterly distribution from $0.910 to $0.930 per unit, representing growth of approximately 2.2%.

Management has also guided for at least $3.70 per unit in total distributions during 2026.

The market has now rerated the units (as we thought would be the case in 2026), reducing the yield to approximately 8%.

Although the valuation is no longer as inexpensive as it was at the beginning of the year, an 8% yield remains attractive for a partnership with investment-grade credit and a covered, growing payout.

Much of the undervaluation has disappeared, but Western Midstream remains fundamentally strong.

5. 🌿 NewLake Capital Partners (NLCP)

Current yield: Approximately 10.96%
2026 total return: Approximately 5.1%

NewLake Capital Partners has produced almost no share-price appreciation during 2026, but its substantial dividend has lifted its total return to 5.1%.

NewLake is a specialized REIT that owns properties leased to licensed cannabis operators.

Its largest risk has historically been tenant credit quality, as federal tax restrictions have prevented cannabis businesses from deducting many ordinary operating expenses.

A transition of cannabis to Schedule III could improve tenant profitability, free cash flow, and rent coverage.

That would reduce one of the most significant risks facing NewLake.

The company has maintained its quarterly dividend at $0.43 per share since the third quarter of 2024.

The dividend remains covered by adjusted funds from operations, and the company maintains a rare net cash position.

NewLake remains speculative, but its covered dividend, low valuation, and strong balance sheet create meaningful upside potential.

4. 💵 NEOS S&P 500 High Income ETF (SPYI)

Current yield: Approximately 11.81%
2026 total return: Approximately 9.4%

SPYI has generated a 9.4% total return while continuing to distribute income at an annualized rate near 12%.

The fund owns exposure to the S&P 500 and writes call options to generate additional income.

SPYI generally maintains options exposure close to 100% of the portfolio, so investors do sacrifice some upside in exchange for larger monthly distributions.

However, the fund typically writes out-of-the-money calls.

This allows the underlying portfolio to appreciate by a certain amount before the options begin limiting gains.

Monthly distributions have ranged from approximately $0.5104 to $0.5353 per share during 2026.

These payments naturally fluctuate based on the option income generated by the strategy, but fluctuate much less than its peers.

SPYI’s primary long-term risk is net asset value erosion. So far, however, the fund has participated in market recoveries while maintaining substantial monthly income.

3. 🏢 AH Realty Trust (AHRT)

Current yield: Approximately 7.85%
2026 total return: Approximately 11.6%

AH Realty Trust has been one of the most interesting winners on the list, with a strong total return to 11.6%.

The company was previously known as Armada Hoffler Properties and traded under the ticker AHH.

It officially became AH Realty Trust and began trading under the ticker AHRT on March 2, 2026.

The name change accompanied a broader strategic transformation.

The former business relied heavily on development and fee-based construction income.

After becoming over leveraged and reducing its dividend, management shifted it’s strategy dramatically.

Under new CEO Shawn Tibbetts, the company is:

• Moving away from volatile fee-based construction income

• Prioritizing recurring property-level cash flows

• Deleveraging the balance sheet and targeting higher-quality financing

• Focusing on fewer, better assets rather than growth for growth’s sake

AHRT has maintained its quarterly dividend at $0.14 per share throughout 2026.

Management has also indicated that the payout is now supported by recurring rental income rather than development fees.

The company also just released their latest quarters earnings, where they increased 2026 FFO guidance.

The turnaround is certainly taking place, but investors must continue monitoring leverage, AFFO coverage, property performance, and asset sales.

2. 🥈 Virtus InfraCap U.S. Preferred Stock ETF (PFFA)

Current yield: Approximately 9.92%
2026 total return: Approximately 1.6%

PFFA’s share price has a total return of 1.6% in 2026 so far.

The fund has maintained its monthly distribution at $0.1725 per share throughout the year.

PFFA is an actively managed preferred-stock ETF.

Preferred securities sit above common equity in the capital structure, meaning preferred dividends generally must be paid before dividends can be distributed to common shareholders.

Preferred stocks can also offer higher yields than bonds issued by companies with similar credit quality.

Active management is particularly useful because many preferred securities are callable.

Issuers can redeem higher-yielding securities when doing so becomes financially advantageous, forcing passive investors to reinvest at lower rates.

An active manager can evaluate call risk (this is a big one), credit quality, interest-rate sensitivity, and relative valuation.

Keep in mind, this fund is a lower volatility income vehicle rather than a source of major capital appreciation.

1. 🥇 MPLX (MPLX)

Current yield: Approximately 7.25%
2026 total return: Approximately 14.4%

MPLX was my number-one high-yield opportunity entering 2026, and it has delivered very strong returns.

Its unit price has appreciated approximately 10.4%, while distributions have increased its total return to 14.4%.

Investors began the year with an 8% yield, and MPLX still yields approximately 7.25% after the rally.

MPLX recently reported Q2 GAAP earnings of $1.06 per unit, in line with expectations, while revenue increased 10.3% year over year to $3.31 billion and exceeded estimates by $170 million.

Management also reaffirmed its expectation for 12.5% distribution growth in both 2026 and 2027.

12.5% distribution growth for a company yielding above 7% is incredible.

With a yield above 7%, strong distributable cash flow, fee-based earnings, and double-digit distribution growth potential, MPLX remains one of the strongest income opportunities on the list.

📊 The Results

These 10 investments were selected independently and were not designed to represent a complete portfolio.

Even so, the group has produced results that I’m incredibly happy with.

Going into the year, the average yield of these picks was 9.23%

Despite this, no position saw a decline in distributions, with some even increasing their payouts (and more increases on the way).

We also saw total returns, inline with the returns of the tech heavy S&P 500!

Absolutely incredible.

We also avoided any of our positions seeing massive drawdowns, which is quite the accomplishment in the high yield space.

While this performance is incredible, our High Yield Portfolio that we run at Dividendology.com has performed even better.

Our High Yield Portfolio is outperforming the market!

But the performance doesn’t tell the whole story.

Not only did this portfolio outperform by a wide margin, but it:

• Had lower volatility (standard deviation)

• Had a lower maximum drawdown

• Had a stronger Sharpe Ratio

The Sharpe Ratio is an important one.

The Sharpe Ratio is a way of measuring how much return you’re getting for every unit of risk you take.

Basically, this portfolio took on less risk than the S&P 500, while still experiencing better returns.

We are incredibly happy with this performance, and are currently investing considerable amount of time and capital on research to continue to unlock the best opportunities in this space.

Let’s review the positions currently in the portfolio:

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Price targets.

In fact, it’s basically tradition for Wall Street’s major banks to issue S&P 500 price targets at the start of every year.

The only thing potentially more common than S&P 500 price targets, is analysts and banks assigning price targets assigning price targets to individual stocks.

However, I’ve never been a huge fan of analysts short term ‘price targets’.

While the below image is a humorous take on price targets, it’s not too far off from how many analysts create price targets.

The reality is that there is a right way and wrong way to issue price targets-

And issuing price targets in the correct manner can reveal companies that have significant upside.

Today, we’ll be creating price targets for four stocks that have the ability to grow 100%.

Let’s dive in.

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🔍 The Issue With Most Price Targets

I enjoy reviewing price targets as much as anyone.

I find them entertaining and potentially insightful at times.

However, what you’ll find is that most price targets are issued with a 1 year time horizon.

This is an issue.

Why?

Because you can only accurately project future returns by looking at stocks through the lens of ‘Sources of Returns’.

As a reminder, stocks have 3 potential sources of returns:

• Earnings per share growth

• Multiple expansion/contraction (Price to earnings ratio growing/shrinking)

• Dividends

For example, here is what the sources of returns look like for the S&P each decade:

Some decades (like the 2010s), earnings growth was the main driver of returns.

Some decades (like the 1980s), multiple expansion was the ultimate driver of returns.

And some decades, when market performance was particularly poor-

Dividends were the main driver of returns, and sometimes the only positive source of returns.

While dividends obviously play a role in calculating total returns, a price target is simply derived by projected future earnings per share, and the future valuation multiple.

This issue with 1 year price targets is that stocks are primarily moved by changes in the valuation multiple in the short term.

It can be incredibly difficult to project changes in the valuation multiple over such a short time period.

Why?

Because in the short term, changes in the valuation multiple are due to a change in sentiment.

But over the long run, share price follows earnings growth.

We can project future cash flows.

But we can’t project short term changes in sentiment around a stock.

And ironically enough, it becomes easier to project future valuation multiples since they are primarily derived from the growth rate of future cash flows-

As well as the predictability of those cash flows.

Therefore, price targets make much more sense over a roughly five year time period.

Let’s create a five year price target for 4 stocks.

1. 💻 Microsoft (MSFT)

Microsoft just released their latest quarters earnings-

Which led to the largest one day change in market value in their history.

The company is spending aggressively to expand its data-center capacity, causing annual free cash flow to decline for two consecutive years.

Despite this spending, Microsoft still generated approximately $67 billion of free cash flow in fiscal 2026.

That separates Microsoft from several other major technology companies that have increasingly relied on debt to finance their AI infrastructure.

Perhaps even more importantly, Microsoft already has substantial contracted demand supporting their increased capex spending.

Commercial remaining performance obligations increased 84% to $678 billion, creating an enormous backlog of revenue that has not yet been recognized.

The issue investors previously had was despite the fact MSFT had a massive backlog, most of that backlog was tied to OpenAI, creating customer concentration risk.

But Microsoft’s AI growth is now becoming more diversified.

Nearly 90% of its full-year cloud revenue came from customers outside frontier-model companies such as OpenAI.

Azure’s growth is now being more driven by broad enterprise adoption, instead of Microsoft relying on one single company (OpenAI).

To build our price target, we will be importing live and historical data into our spreadsheet, as well as importing the average analyst EPS estimates into our sheet using Tickerdata.

Microsoft’s price target is based on two assumptions:

1. Analysts expect Microsoft’s earnings per share to grow from $13.70 in 2025 to $35.77 by 2030, representing annualized EPS growth of approximately 21.2%.

2. The model assumes Microsoft trades at 25 times earnings in 2030.

That is a relatively conservative assumption because it is roughly in line with Microsoft’s current P/E ratio of 25.15 and well below its four-year average P/E ratio of 34.

The calculation is straightforward:

Compared with the current share price of $455.10, that represents approximately 96.5% upside, meaning the stock would nearly double by 2030.

Keep in mind, if we include dividends, this would put Microsoft’s total return during this time period over 100%.

2. 📱 Meta Platforms (META)

Meta stock is one of the worst performing MAG7 stocks in the last year, now down by nearly 30%-

With a 10% drop occurring in the last few days of releasing their earnings report.

Despite this, revenue continues to grow at an exceptional rate for Meta, with revenue increasing by nearly 28% year over year.

Meta’s results are primarily driven by three variables:

• Family daily active people (DAP) – DAP was 3.60 billion on average for June 2026, an increase of 3% year-over-year.

• Ad impressions – Ad impressions delivered across Meta’s Family of Apps increased by 14% year-over-year.

• Average price per ad – Average price per ad increased by 12% year-over-year.

These three combine to push Meta’s Q2 revenue to over $59 billion.

The headline earnings miss on EPS is less concerning after diving into why this occurred.

Meta recorded approximately $2.4 billion in legal charges and $1.18 billion in severance expenses.

Excluding these one time costs, the core business continued to perform well.

Of course, the sell off comes partly as a result of Meta slightly increasing the low end range of their capex guidance.

Management expects 2026 capital expenditures to reach between $130 billion and $145 billion as Meta builds the computing infrastructure required for artificial intelligence.

This spending will very likely push free cash flow into negative territory and ultimately force the company to raise additional capital through the bond market.

The bond market is already beginning to reflect these concerns.

Meta’s five year credit default swap spread has risen considerably in recent months.

A credit default swap acts like insurance against a company failing to repay its debt, so a rising spread indicates that investors are demanding more compensation to take on that credit risk.

The market has become increasingly less confident in the quality of Meta’s debt as the company increases borrowing while committing enormous amounts of capital to AI infrastructure-

Of course, leading to the stock selling off.

Analyst’s are projecting Meta’s earnings per share to increase from $23.98 in 2025 to $54.91 by 2030, representing annualized EPS growth of approximately 18%.

The price-target calculation is:

A 21 multiple is approximately in line with Meta’s current valuation and remains below its four-year average P/E ratio of 22.14.

Compared with the current share price of $547.74, that represents approximately 110.5% upside and an annualized return of roughly 16.1% through 2030, before dividends.

Meta doesn’t need the valuation multiple to increase to see great returns.

It simply needs its earnings to grow as analysts expect while maintaining roughly its current valuation.

3. 🏥 UnitedHealth Group (UNH)

Remember when the market left UNH for dead?

UnitedHealth Group is now up over 68% in just the last year.

To be fair, they still haven’t recovered from their massive sell off in April of last year, when the stock was trading at nearly $600 a share.

The company faced elevated medical costs, pressure within Medicare Advantage, operational problems at Optum Health and a Department of Justice investigation into aspects of its Medicare business.

That, combined with the costs associated with a cyber security attack, led to the first drop in EPS in years for UnitedHealth Group.

Keep in mind, UnitedHealth has confirmed that it is still cooperating with the DOJ’s civil and criminal requests, meaning regulatory uncertainty remains an important risk we need to be aware of.

The central thesis is that UnitedHealth’s current earnings are set to recover to previous levels in the coming years-

As well as the fact that UnitedHealth’s medical care ratio improved to 86.7% in the recent quarter, meaning they’re spending a smaller percentage of its premium revenue on medical claims.

Analysts expect earnings per share to increase from $13.23 in 2025 to $34.29 by 2030, representing annualized growth of approximately 21%.

The price-target calculation is:

The spreadsheet displays a target of $857.13, with the slight difference caused by using unrounded earnings estimates in the underlying calculation.

A 25 multiple is below UnitedHealth’s current P/E ratio of 27.06 and slightly below its four-year average of 26.07, so the price target does not require aggressive multiple expansion.

4. 💾 Broadcom (AVGO)

Is it possible for a stock that is already up 700% in the last 5 years to see another double?

Short answer: Yes.

Stock price movement by itself tells us nothing about the valuation of a stock.

Unlike companies spending hundreds of billions of dollars to construct AI infrastructure, Broadcom primarily benefits by supplying the technology required to build it.

Its products include custom AI accelerators, networking chips and Ethernet solutions that allow enormous clusters of processors to communicate efficiently.

The growth has been remarkable.

The company has grown free cash flow at a compounded annual growth rate of over 31% over the past decade.

Broadcom currently trades at more than 60 times trailing earnings, substantially higher than most companies in the S&P 500.

However, the rate at which they are continuing to grow earnings more than justifies this.

Analysts expect Broadcom’s earnings per share to increase from $4.91 in 2025 to $35 by 2030, representing annualized EPS growth of approximately 48.1%.

The price-target calculation is:

That assumes Broadcom’s valuation contracts dramatically from its current P/E ratio of approximately 62 to only 26.5 by 2030.

In other words, the price target already accounts for significant multiple compression as the company matures.

Compared with the current share price of $385.85, the target represents approximately 140.4% upside and an annualized return of roughly 19.2% through 2030, before dividends.

🎯 Our Price Targets

It’s important to remember that none of our price targets today were vague or based on hype.

In fact, we did quite the opposite.

Using Tickerdata, we took the average EPS estimate from analysts, and then provided a conservative PE ratio based on their historical averages.

So even though each of these stocks had over 100% upside, that is certainly not their best case scenario.

Each of these stocks has the ability to grow their dividend at double digit growth rates in the future as well.

If you want to be able to auto-import stock financials into your spreadsheet and get access to this price target sheet, you can do so at Tickerdata.

⚡Our Dividend Growth Portfolio

The goal of our Dividend Growth Portfolio?

Buy stocks that allow us to benefit from all 3 of the sources of returns.

This is what leads to potential outperformance over the long term.

If you want to be a part of the process of building this portfolio and also get access to everything mentioned below, you can join here:

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Dividendology

Check out these resources:

Tickerdata 🚀 (TICKERDATA SUMMER SALE (CODE: ‘HEAT’ FOR 30% OFF)

Interactive Brokers 💰 (My favorite place to buy and sell stocks all around the world!)

Seeking Alpha 🔥 (Research stocks $30 off! + 7 day free trial)

HYSA 📊 (Get Access to the Best High Yield Savings Accounts!)

Disclaimer: As a reader of Dividendology, you agree to our disclaimer. You can read the full disclaimer here.

This means:

• You get paid whether the market goes up or down

• You get paid without stressing about short-term price moves

• You aren’t forced to sell assets

It’s truly the ultimate sleep-well-at-night strategy.

But if you’re in the early to mid-stages of building your dividend snowball, it’s important to not solely focus on the dividend yield of your investments.

You need to focus on buying stocks with high dividend growth potential.

What gives stocks the ability to grow dividends at a high rate?

Growing free cash flow.

And ironically enough, growing free cash flow at a high rate not only leads to high levels of dividend growth, but it often leads to market outperformance as well.

But did you know there is another group of stocks that have historically outperformed?

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📊 The ‘Other’ Outperforming Group

Dividend growth isn’t the only historical indicator of outperformance.

The other category of outperforming stocks?

Founder-Led Companies, also known as owner-operator stocks.

Over a 14-year period, family-owned businesses consistently outperformed their non-family counterparts.

• The family-owned universe grew to nearly 2.5x (250%) the original value.

• The non-family universe only reached about 1.5x (150%).

The reason for this outperformance is straightforward:

Owners think and act differently from management.

Management thinks about maximizing their next quarterly earnings.

Owners think in decades.

Think of it this way:

The Typical Public Company

• Run by agents, not owners

• Focused on quarterly earnings

• Compensation tied to short term incentives

The Owner-Operator Model

• Management = Shareholders

• Personal wealth is at risk

• Focus on long-term profits and value creation

Basically, skin in the game matters.

📑 56 Owner Operator Dividend Growth Stocks

Many of the companies that are founder led also happen to be dividend growth stocks.

This shouldn’t come as a surprise.

Why?

Because free cash flow growth ultimately leads to dividend growth.

I’ve identified 56 different owner operator dividend growth stocks. 👇

You can download the above spreadsheet of 56 Owner Operator Dividend Growth Stocks here:

56 Owner Operator Dividend Growth Stocks

The median 5 YR EPS CAGR on this list is a strong 13.44%, while the median return on invested capital sits at 15.55%.

Let’s look at a couple case studies.

🧼 Case Study No. 1: Cintas Corporation

Cintas is a great example of how a simple, recurring-service business can become a long-term compounding machine.

The company rents, cleans, and delivers uniforms while also providing products and services such as:

• Floor mats

• Restroom supplies

• First-aid products

• Safety training

• Fire-protection services

None of these services are particularly exciting, but the economics are attractive.

Many customers rely on Cintas every week to collect uniforms, clean them, replace supplies, and maintain workplace-safety equipment.

Once these services are integrated into a company’s daily operations, switching providers can be inconvenient and disruptive.

A business may need to replace uniforms, resize employees, coordinate new pickup and delivery schedules, transfer service records, and retrain staff on a new system.

This creates recurring revenue, strong customer retention, and opportunities to sell additional services to existing customers.

This is largely why their revenue and EPS growth has been so stable-

While simultaneously expanding their margins.

Richard “Dick” Farmer built the modern company, and his son Scott Farmer later served as CEO from 2003 through 2021.

Scott Farmer now serves as executive chairman and beneficially owns approximately 14.4% of the company.

Although Cintas is no longer run by a Farmer family member on a daily basis, the company still has many owner-operator characteristics:

1. Significant family ownership

2. Family involvement at the board level

3. Leadership developed internally

4. A long-term corporate culture

5. Disciplined capital allocation

Current CEO Todd Schneider joined Cintas in 1989 and spent more than three decades inside the organization before taking the top position.

Over the last decade, Cintas had a free cash flow compounded annual growth rate of over 17%-

Which ultimately led to market outperformance as well as explosive dividend growth of over 18% annually.

Cintas generated approximately $11.3 billion in revenue during fiscal 2026 and produced nearly $1.9 billion in free cash flow.

As a result of a decade of exceptional fundamental performance, the market is currently valuing Cintas at a premium.

Earnings growth is projected to remain in the low double-digits over the next few years, but investors would still have to pay 39 times earnings to buy shares at its current valuation.

However, this is essentially in line with their 5 year average P/E multiple.

🚛 Case Study No. 2: Old Dominion Freight Line

Old Dominion Freight Line is another deceptively simple business.

The company transports less-than-truckload freight, combining shipments from multiple customers inside the same trailer and moving them through a nationwide network of service centers.

Executing this well is extremely difficult.

Freight must be collected, routed, transferred, and delivered without significant delays or damage.

Old Dominion’s competitive advantage is the reliability of its network.

The company regularly reports on-time service near 99% and one of the lowest cargo-claims ratios in the industry.

For customers transporting valuable or time-sensitive goods, reliability undoubtedly matters more than choosing the lowest-priced carrier.

Old Dominion was founded in 1934 by Earl and Lillian Congdon.

The Congdon family remains meaningfully involved in the business more than 90 years later.

David Congdon, the founder’s grandson, previously served as CEO and now serves as executive chairman. Members of the Congdon family collectively continue to own a significant percentage of the company.

Like Cintas, Old Dominion’s current CEO is not a member of the founding family.

However, CEO Marty Freeman spent decades inside the company before taking the role.

The company therefore retains several owner-operator characteristics:

• Meaningful family ownership

• Family representation on the board

• Internally developed leadership

• Conservative financial management

Old Dominion operates in a highly cyclical industry.

During freight downturns, many carriers reduce capital spending to protect short-term earnings.

Old Dominion has historically continued investing in:

1. Service centers

2. Tractors and trailers

3. Technology

4. Employees

5. Network capacity

Those investments may reduce free cash flow in the short term, but they allow the company to improve service, handle more freight, and capture market share when demand recovers.

However, revenue per share as well as earnings per share have stalled in the last 3 years.

ODFL’s recent revenue decline has primarily been caused by a prolonged downturn in the freight market.

Manufacturers and retailers have been shipping fewer goods, leading to lower shipment volumes and less freight moving through the company’s network.

ODFL has maintained strong pricing, but higher revenue per shipment has not been enough to fully offset the decline in total volume.

Lower network utilization has also pressured earnings because the company must continue operating its service centers, equipment, and workforce even when fewer shipments are moving through the system.

Despite weaker current results, ODFL’s stock has risen because investors are focused on what earnings could look like when the freight market eventually recovers.

Several factors are driving that optimism:

1. The freight downturn may be approaching a bottom.

   Investors expect shipment volumes and demand to eventually normalize after an unusually long slowdown.

2. ODFL has significant operating leverage.

   Because much of its network is already in place, additional freight can produce revenue without expenses rising at the same rate.

3. The company continues gaining long-term market share.

   Its reliable service and low cargo-claims rate make it one of the strongest operators in the industry.

All of the above are evident in analyst EPS projects, which are currently sitting at over 15% growth annually over the next few years.

In other words, the market is largely looking past today’s weak freight environment and pricing the stock based on an expected recovery in future earnings.

Of course, the risk now is that ODFL’s premium valuation already reflects much of that recovery.

🏁 The Bottom Line

There is significant crossover with Owner Operator stocks and Dividend Growth stocks-

Which makes sense, as long term free cash flow growth eventually leads to dividend growth.

When founders, families, and executives have meaningful personal wealth invested alongside shareholders, they are often more willing to prioritize sustainable growth over short-term results.

Like always if you want to join the largest community of dividend growth and high yield investors, and get access to all the features mentioned below, you can do so here:

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💰 Which Income ETF is Best?

The tech heavy QQQ is up an astounding 87.93% in just the last five years.

While the majority of income investors don’t hold QQQ due to its lack of yield-

Many do own the option income ETFs that give them exposure to this index while providing 10%+ yields.

The three most popular as of right now are:

• NEOS Nasdaq-100 High Income ETF (QQQI)

• Goldman Sachs Nasdaq-100 Premium Income ETF (GPIQ)

• JPMorgan Nasdaq Equity Premium Income ETF (JEPQ)

And while the funds may seem similar on the surface level, a closer look will reveal that these funds are built very differently.

Today, we will be deciding which of these High-Yield ETFs is best-

And why there is one ETF that I believe is better than all three.

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💰Performance

Let’s start by reviewing year to date returns for these funds.

As of right now, GPIQ is the clear leader out of the three.

But wait!

That’s just the price return.

The majority of the returns from these funds come from distributions.

So what do year to date returns look like from a total return perspective?

While all three get a significant boost to their returns, GPIQ is still the clear leader, with most of their outperformance coming after March.

This outperformance coming after March is important to note, because it’s a result of the way these funds are structured-

But more on that in just a moment.

If we review the results over a one year time period, GPIQ again is the clear winner whether we look at just price performance or total return.

It’s important to note that these returns must be compared to the returns of QQQ, since that is primarily the underlying index these funds aim to track.

QQQ has a total return of 23.32% in the last year.

So perhaps the most important question is this:

“How much of the upside did each of these funds capture?”

• QQQI: 71.1%

• JEPQ: 80.1%

• GPIQ: 99.3%

GPIQ has managed to capture nearly all of the upside over the last year.

And like mentioned above, this is completely due to the way these funds are structured-

And also plays a major role in the long term sustainability of their distributions.

So naturally, let’s evaluate the way these funds are structured to cause this difference in performance.

⚙️ Portfolio Options Coverage

Do you know what one of the most important metrics for Covered Call ETFs is?

Portfolio options coverage.

We discussed this in our Guide to Covered Call ETFs on Tuesday.

A strategy that writes options against a larger portion of its holdings can generally collect more premium income.

However, it may also retain less participation in the underlying asset’s upside.

A lower-coverage strategy typically generates less premium but allows investors to participate more fully if the asset appreciates.

Financial softwares don’t provide this data, so I’ve gone through ETF prospectuses and fact sheets to compile this data in the Dividendology Covered Call ETF Database.

So what does the portfolio options coverage look like for our three ETFs in review?

1. QQQI: Close to 100%

2. JEPQ: Close to 100%

3. GPIQ: 25% - 75%

This data explains much of the performance gap between these ETFs.

Not only does it explain why GPIQ has outperformed its peers, but it also explains much of the distributions made by these ETFs.

💵 Distributions

Below is the portfolio options coverage, along with the trailing twelve month yield for each fund.

QQQI writes call options against nearly 100% of its portfolio.

Because more of the portfolio is covered, the fund can collect option premiums on a larger amount of assets.

Those premiums help support QQQI’s 13.5% trailing 12-month distribution rate, the highest of the three funds.

The trade-off is that more of the portfolio’s upside is exposed to being capped.

When the Nasdaq rises sharply, QQQI may have to surrender some gains because of the calls it has sold.

This is exactly what happened in late March/early April.

QQQI prioritizes maximizing income today versus maximizing capital appreciation potential.

JEPQ also maintains options exposure near 100%, however, you’ll notice its trailing distribution rate is lower than QQQI, at approximately 10.4%.

Why would this be the case if their portfolio options coverage is the same?

JEPQ uses an actively managed stock portfolio and generates options exposure through equity-linked notes.

Its results are influenced by the securities selected, market volatility, option pricing, portfolio positioning, and the exact terms of its options strategy.

Even though JEPQ covers a large portion of its portfolio, it may collect less premium than QQQI depending on factors such as:

• The volatility of its underlying holdings

• How far out of the money its options are written

• The duration of the contracts

• The timing of option sales

• The fund’s active risk-management decisions

In theory, this should allow JEPQ to pursue a balance between income and reduced volatility rather than simply targeting the highest possible distribution.

However, you’ll also notice this causes their distributions to be substantially more volatile than their peers.

For the investor seeking predictable and stable income, that isn’t ideal.

GPIQ generally writes options against approximately 25% to 75% of its portfolio.

Because a smaller portion of the fund is overwritten, GPIQ collects less option premium than a fund covering nearly 100% of its assets, which explain why its trailing distribution rate is the lowest of the group at approximately 9.7%.

However, the lower coverage ratio leaves more of the portfolio uncapped.

When the Nasdaq rises, a larger portion of GPIQ’s holdings can participate in that appreciation.

As a result of a growing net asset value, it actually allows the fund to support higher distributions over time.

This is essentially what allows Covered Call ETFs to see ‘dividend growth.’

🧾 Taxes

One of the areas these ETFs differ the most is taxes.

Overall tax implications can vary dramatically for each individual-

However, I built out a model where you can change the variables to see what different tax implications could potentially look like for each of these ETFs.

Covered-call ETF payments can consist of several classifications:

• Ordinary income

• Qualified dividends

• Long-term capital gains

• Return of capital

Each category can receive different federal tax treatment.

Keep in mind, the tax classifications for the distributions has the potential to vary every month, and to a wide degree for some ETFs.

Based on the distribution classifications used in our model, substantial portions of QQQI’s and GPIQ’s distributions were classified as return of capital.

Return of capital is generally not taxed as current income when received.

Instead, it reduces the investor’s cost basis.

That can provide a meaningful tax-deferral benefit, especially for investors attempting to live on portfolio income in a taxable account.

However, return of capital is not permanently tax-free.

Because it lowers the cost basis, the investor may recognize a larger capital gain when the shares are eventually sold.

Once the cost basis reaches zero, additional return-of-capital distributions may also become taxable capital gains.

Using a hypothetical single filer earning $80,000 annually, our model produced dramatically different first-year federal tax estimates:

With a W-2 wage on an $80,000 salary, you would likely be paying around $8,770 in federal income tax.

$80,000 in distributions from any of these ETFs would result in less federal tax-

However, GPIQ and QQQI are substantially more tax efficient (at least in year one), potentially reducing your federal income-tax liability substantially in the modeled scenario.

You can get access to the tax sheet and input different variables here.

🏆 Who’s the Winner?

So which of these funds is best?

The reality (like almost always in finance) is that it depends.

Each fund (although similar) solves a different problem.

Here’s an in depth breakdown of the overall of strengths and weaknesses:

To simplify it as much as possible:

• QQQI is best for maximizing income

• GPIQ is best for balancing growth and income

While JEPQ may be less volatile, the fluctuations in distributions and lack of growth make it less appealing than the other two for most investors.

However, we don’t own any of these funds in our High Yield Portfolio on Dividendology.com.

Instead, we’ve elected to own one Covered Call ETF that is radically different in nature to these ETFs.

As a result, our portfolio has outperformed in 2026, while offering a sustainable yield of over 9.3%.

This ETF has been able to:

• Yield 11%+

• Grow distributions

• Grow net asset value

Let’s briefly review this ETF, as well as our outperforming High Yield Portfolio:

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Total assets in U.S. derivative-income funds climbed above $140 billion by the end of 2025, up from less than $10 billion just a few years ago.

However, the vast majority of investors still don’t understand how these funds are structured.

Last year, I sent out a poll asking my newsletter readers how comfortable they felt analyzing and understanding the key metrics for these ETFs/ETPs.

Only 4% felt confident!

Today, we will be taking a deep dive on how Covered Call ETFs/ETPs work-

While using real examples from IncomeShares.

Before we jump in, a special thank-you to IncomeShares for sponsoring today’s newsletter and helping make this educational breakdown possible.

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📘 IncomeShares

IncomeShares is a European provider of high-yield exchange-traded products designed to generate monthly income through options strategies.

Each traditional asset class has limitations for income investors:

1. Growth stocks may pay little or no dividend

2. Real estate can generate income, but direct ownership requires time, expenses, and management

3. Commodities generally produce no income at all

This makes commodities particularly interesting.

Investors may want exposure to gold as a potential store of value, silver as both a precious and industrial metal, or oil as a way to participate in global energy demand.

However, simply owning the asset does not create cash flow.

Commodity option-income ETPs seek to combine exposure to these assets with an actively managed options strategy.

Rather than waiting for the commodity to appreciate, the strategy repeatedly sells options in an attempt to generate recurring income.

Let’s review exactly how they generate income from commodities.

🧩 What Is a Covered Call Option?

A covered call is an options strategy that combines two positions:

1. Owning an asset

2. Selling a call option on that asset

A call option gives its buyer the right, but not the obligation, to purchase an asset at a predetermined price, known as the strike price, before the option expires.

The buyer pays the seller an upfront fee called an option premium.

That premium is where the income comes from.

For example, imagine a gold-linked investment is trading at $300.

An investor owns the investment and sells a call option with a $310 strike price in exchange for a $5 premium.

From there, three basic outcomes are possible:

Covered calls tend to be most attractive in flat, choppy, or moderately rising markets.

To put it even more simply:

• In a powerful bull market, the strategy may underperform the underlying asset because the sold calls limit some of the upside.

• In a flat market, the strategy may outperform because it continues collecting premiums while the underlying asset goes nowhere.

• In a declining market, the premium may allow the strategy to lose less than the asset itself. However, it can still experience meaningful losses because it retains exposure to the underlying investment.

For example, if gold remains range-bound for several months, repeatedly selling calls will produce income that would not exist from simply holding gold.

IncomeShares uses covered-call strategies for its Gold+ Yield and Silver+ Yield ETPs.

Beyond the type of options strategy used, three primary metrics affect how the fund operates.

Let’s review each of them.

📊 1. Portfolio Options Coverage

One of the most important metrics investors must know is portfolio options coverage.

Financial softwares don’t provide this data, so I’ve gone through ETF fact sheets to compile this data in the Dividendology Covered Call ETF Database.

But why is this metric so important?

A strategy that writes options against a larger portion of its holdings can generally collect more premium income.

However, it may also retain less participation in the underlying asset’s upside.

A lower-coverage strategy typically generates less premium but allows investors to participate more fully if the asset appreciates.

This creates a sliding scale between income and growth.

The higher the portfolio’s options coverage, the more likely it is to have:

• More immediate premium income

• Less upside participation

On the flip side, less option coverage means:

• Lower immediate income

• More upside participation

Two products tied to the same commodity can therefore deliver very different results depending on how aggressively they sell options.

⚡ 2. Volatility

Option premiums are heavily influenced by expected volatility.

Therefore, higher volatility typically equals larger distributions.

When the market expects an asset to make larger price moves, option buyers are generally willing to pay more for the possibility of benefiting from those moves.

This helps explain why option-income products tied to volatile assets may advertise larger distribution rates.

The strategy can potentially collect more premium because the underlying asset is expected to move more dramatically.

Gold will at times experience periods of relatively low volatility, while silver can experience much larger price swings.

🎯 3. Option Moneyness

The third important factor is option moneyness, which describes where the option’s strike price sits relative to the current price of the underlying asset.

For call options, there are three main categories:

1. Out of the money: The strike price is above the current market price.

2. At the money: The strike price is close to the current market price.

3. In the money: The strike price is below the current market price.

Why does this matter?

Because moneyness affects both the amount of income generated and how much upside the investor keeps.

To put it simply:

More aggressive strike selection can create more income, but it usually comes at the cost of lower upside participation.

Less aggressive strike selection generally creates less income, but allows the investor to benefit more if the underlying asset rises.

Again, that means two covered-call products tied to the same commodity can have very different return profiles depending on whether they sell out-of-the-money, at-the-money, or in-the-money calls.

🌍 IncomeShares Commodity ETP Lineup

IncomeShares currently offers commodity option-income ETPs tied to copper miners, gold miners, gold, silver miners, silver, uranium, and WTI oil.

The Gold+ Yield and Silver+ Yield ETPs use covered-call strategies, while the other commodity products use a cash-secured put plus equity strategy.

The main takeaway is that these products are not simply passive bets on commodity prices.

They combine commodity exposure with an options overlay designed to turn volatility into recurring income.

Many of their commodity ETPs currently have distribution yields near 12%.

🛠️ P.S. – I Have Something BIG For You…

Dividendology has become the largest dividend investing Substack newsletter in the world over the last year.

Members have gotten access to exclusive tools such as:

• Covered Call ETF Database

• Model Portfolios

• REIT Database

• BDC Database

• Most Upside Dividend Stocks

However, I’m obsessed with providing as much value as possible.

That’s why I’ve been working on something in the background:

A Covered Call ETF database specifically for European investors, as well as expanding coverage of opportunities in European markets.

I believe this will provide tremendous value for European investors.

If you want to get access to this, as well as all the features mentioned below, you can do so here:

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While the Dividend Growth Portfolio is still in its early stages. I’m quite excited about the way our portfolio is shaping up.

Before the addition we made to the portfolio today, here’s how the portfolio was shaping up:

However, after today’s addition, our portfolio gets fundamentally stronger.

On top of this, the valuation of our portfolio drops even lower from a price-to-earnings-growth perspective.

In a market that many would argue is overvalued, we’ve been able to add positions to our portfolio that:

• Are fundamentally healthier than the S&P 500

• Are growing revenues and EPS at a faster rate than the S&P 500

• Trade at a more attractive valuation than the S&P 500

And of course, our portfolio has a higher yield than the S&P 500 while growing dividends at a substantially faster rate.

Our last addition to the portfolio was made in April, and that position is up over 30%!

While it’s fun to see gains in a short period of time, in reality, it means very little.

I’m far more concerned with the quality of the portfolio, and the evolution of the intrinsic value of the underlying holdings in the portfolio.

Let’s review the goals for our portfolio.

🧩 The Portfolio

As a reminder-

The goal of the Dividend Growth Portfolio is simple:

To achieve dividend income growth of 7–10%+ annually, while maintaining capital appreciation in line with or better than the S&P 500 over a full market cycle.

Achieving the above goal would allow us to take full advantage of all of the benefits of dividend growth investing, which you can see here.

Members of Dividendology will be able to view all the holdings of the Dividend Growth Portfolio on Dividendology.com.

💰Our New Buy

The stock we’re adding to our portfolio today has many attractive characteristics, such as the fact they:

• Are projected to grow EPS at a high double digit rate annually over the next 3 years

• Are trading at a PEG ratio substantially below the S&P 500

• Are growing dividends at a double digit rate

It meets the quality criteria, while also trading at an interesting valuation.

This is the fifth purchase for our Dividend Growth Portfolio.

If you haven’t joined already, you can get access to everything pictured below here:

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Now, let’s dive into our fifth Dividend Growth addition…

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Members will get access to the full list every month, as well as all other Dividendology features.

This month, only 53 stocks made the list.

Let’s dive in.

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1. 💻 Microsoft (MSFT)

Wall St. Price Target: $560.42 | Upside: 45.53%

Microsoft has been the worst performing MAG7 stock in 2026.

When looking at a heat map of the S&P 500, they stand out significantly, now down nearly 20% year to date.

The result of this is that Microsoft is now trading at its lowest P/E multiple in the last 5 years-

But at the same time, its near its highest FCF multiple in the last 5 years.

Of course, the cause behind the climbing free cash flow multiple is not any issues with the cash flows the core business is generating.

In fact, operating cash flows grew from $118 billion in 2024 to over $136 billion in 2025.

However, capex spending increased by over $20 billion, leading to a rare decline in free cash flow.

This of course is because the company is spending aggressively to construct data centers, purchase advanced chips and expand the infrastructure supporting Azure and artificial intelligence.

They are competing in the exact same AI race as other hyperscaler stocks, such as:

• Meta

• Amazon

• Oracle

• Google

All of these companies have dramatically increased capex spending to the degree where free cash flow between the five of them is projected to be nearly zero over the next 12 months.

However, one of the companies is continuing to generate meaningful positive free cash flow, and that’s Microsoft.

In fact, since essentially all of these companies are spending all of their operating cash flows on capex spending, they are simultaneously having to issue debt to raise capital.

Again however, you won’t see MSFT on this list.

Hyperscalers have issued $350B+ in debt since 2025 to fund AI capex, while Microsoft has issued none.

Microsoft’s biggest advantage is that it can fund this investment cycle more comfortably than most of its competitors.

Other hyperscalers have increasingly relied on bond issuance as their AI spending absorbs or exceeds internally generated cash flow.

Microsoft, by comparison, is expected to remain solidly free-cash-flow positive throughout the investment cycle.

Microsoft can continue investing without taking on the same level of interest expense, refinancing exposure or balance-sheet risk.

Its enormous base of recurring revenue from Microsoft 365, Azure, enterprise software and cybersecurity provides the financial foundation needed to fund AI infrastructure internally.

Consensus projections from S&P Market Intelligence suggest Microsoft’s free cash flow will remain above $50 billion during the investment trough before beginning to spike in 2028.

By 2029, free cash flow could potentially surpass $129 billion as spending growth slows and revenue from the new capacity accelerates.

This creates a potential free-cash-flow inflection point similar to what other capital-intensive technology companies (like TXN) have experienced after completing major investment cycles.

But with the free cash flow projections from S&P Market Intelligence, we can create a very detailed discounted cash flow model.

According to our model, we can see Microsoft would have over 33% upside from current prices.

2. 🏢 Digital Realty Trust (DLR)

Wall St. Price Target: $219.85 | Upside: 25.71%

Digital Realty is a REIT yielding around 2.74%.

While most of the REIT market has been left behind over the last three years, DLR has vastly outperform the Vanguard real estate index.

DLR is a unique REIT, in that it is positioned directly at the intersection of real estate, cloud computing, and artificial intelligence.

The company owns and operates data centers that provide the power, connectivity, and physical infrastructure required by hyperscalers and other large technology customers.

As a result, their projected FFO growth is quite strong, especially relative to the REIT market as a whole.

The recent decline following Digital Realty’s transaction with Blackstone appears to have created an attractive entry point.

Digital Realty agreed to acquire Blackstone’s remaining 64% interest in three data center developments in Northern Virginia.

The properties represent 96 megawatts of capacity and are already fully leased to hyperscale customers under 15-year contracts containing annual rent escalators of approximately 3.6%.

Although Digital Realty is paying a substantial price, the properties are expected to generate an initial stabilized return of above 6.5%.

But here’s what is interesting.

The market currently values Digital Realty’s existing portfolio at an implied return of roughly 5%.

In effect, the company is acquiring new cash flows more cheaply than investors are valuing its own cash flows.

The transaction also allows Digital Realty to bypass one of the industry’s biggest constraints: access to power.

Vacancy in Northern Virginia, the world’s largest data center market, is exceptionally limited.

Acquiring facilities that are already powered, leased and under construction will be considerably more valuable than starting new projects that could face years of permitting, utility and construction delays.

This is in part why AFFO per share is projected to start growing at a faster rate.

On top of this, the dividend is very well covered, and should see strong dividend growth moving forward as AFFO continues to grow at a near double-digit rate.

The primary risk is that Digital Realty must continue issuing shares, forming joint ventures or borrowing money to fund its enormous development pipeline.